Credit reporting framework review underway

The Treasury announced an independent review of Australia’s credit reporting framework back in February 2024. The review is examining the effectiveness and efficiency of the credit reporting provisions in the Privacy Act 1988 and the National Consumer Credit Protection Act 2009.

Former Australian Prudential Regulation Authority (APRA) senior executive Heidi Richards was appointed to conduct the review and the report is to be provided to the relevant ministers before 1 October 2024 and to be tabled in each House of the Parliament within 15 sitting days.

The Mortgage and Finance Association of Australia (MFAA) made its own recommendations to help support the review and highlighted just how important this initiative is for the industry. The recommendations highlighted that:

• Credit reporting is integral to providing comprehensive information about clients’ financial position, to help meet responsible lending and mortgage broker best interests’ duty obligations.
• Improving information availability and quality across all credit reporting bureaus will improve timely access to credit for clients.
• Greater consumer understanding of credit reporting overall will help Australians make better informed financial decisions.

“We understand the purpose of the review is to find out what is working well and what needs to be improved with respect to Australia’s credit reporting framework,” said the MFAA.

“The framework plays a critical role in regulating credit reporting in Australia. Importantly for our members, the framework supports their access to negative and positive credit reporting data to help them provide credit assistance to consumers and small businesses alike. This includes to support their compliance with responsible lending obligations as well as to ensure that the recommendations that they make are in the best interests of their clients.”

The four recommendations are as follows:

1. Explore opportunities to improve information asymmetry between credit reporting bureaus (CRBS)

“We see an opportunity to build consistency with respect to the supply of credit reporting information by credit providers to credit bureaus through the credit reporting data standards and through incentivising further signatories to the Principles of Reciprocity and Data Exchange (PRDE) which, in turn, we suggest will flow into more consistent consumer credit reports.”

2. Explore opportunities to extend comprehensive credit reporting

“As the non-bank lending sector continues to grow, and there is further innovation in non-bank lending products such as buy, now pay later, we suggest there is an opportunity for comprehensive credit reporting to include a complete range of (regulated) non-bank credit products a consumer may have access to. Including non-bank lending in the CCR regime would provide more complete information with which credit providers and credit assistance providers can conduct assessments of a consumer’s creditworthiness and which will lead to better consumer outcomes.”

3. Explore opportunities to integrate the credit reporting and consumer data right (CDR) frameworks

“As the CDR framework continues to mature and expand to different sectors of the economy, reviews such as this one continue to explore opportunities to ensure that the CCR and CDR framework complement each other, with the aim to deliver more streamlined processes for obtaining credit, refinancing or switching products.”

4. Continued investment by the federal government to support a whole of industry approach to the development of educational resources

“Brokers facilitate more than 74 per cent of all home loans in Australia and act as the first point of contact for many consumers looking for a loan. Critical also to note is that brokers provide significant financial literacy and budgeting support to their clients. In particular, for certain consumers (for example those who are vulnerable or experiencing hardship), brokers provide critical services to support these consumers with respect to their credit history, including understanding their credit reports.”

Now, the Treasury is considering CDR’s expansion into non-bank lending and the regulation of screen scraping technologies. According to MFAA, “open banking/CDR will help brokers to increase efficiency in your business and provide a safer and more comprehensive way for your clients to share their information with you”.

[Related: APRA reforms to ‘strengthen the ability of banks’]

Jack Campbell is the editor of Broker Daily. After graduating from the University of Wollongong in 2022, Jack began his journalistic career working on Broker Daily’s sister brand, HR Leader. In August 2023 he was made the news editor and worked alongside some talented journalists writing articles and recording podcasts.

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