Currently, our system allows only negative information to be recorded on a credit file. This only information which portrays deficiencies in credit worthiness is published on your credit history.
The new changes being Comprehensive Credit Reporting empowers lenders to list borrower’s good qualities, not just the bad.
The million dollar question is how will the introduction of the new system affect the consumer?
By way of background, as part of the 2007 election policies the government announced it would give serious consideration to recommendations made by the Australia Law Reform Commission as to Privacy in particular in the area of Credit Reporting.
The reforms are significant and have been released as part of draft provisions to be adopted as part of the new Australian Privacy Principles.
Currently the draft reforms have been referred to a Senate Committee for consideration. The reforms have been adopted as legislation and its’ application in credit reporting has arrived.
Essentially, the main feature of comprehensive credit reporting is the additional information able to be recorded on a credit file. There are five additional pieces of information being added in addition to the already used negative information;
- 1. Type of account.
- 2.Date the account was opened.
- 3.The date the account was closed.
- 4. Credit limit placed on the account.
- 5. Repayment history.
The previous system provides for accounts which are 60 days or more in the arrears to be listed as a default on a credit file.
The new regime provides for expanded information to be recorded, the proponents of this system tell us this will provide as clearer and more precise insight as to credit worthiness.
In addition, they argue this additional information is essential if lenders are to comply with stricter responsible lending practices, and as such benefits will flow to both lenders and borrowers.
Recently a great deal of hype and commentary has been released about this topic. Sufficiently agitated are the arguments in support of the new proposals, together with augments which detract from the new regime in particular the concept that marginal borrowers shall be prevented from borrowing in the future.
Of little concern to all commentators is the recording of information on a credit file with sufficient precision so as to avoid information being recorded on a credit file which is inaccurate and not up to- date.
The proposed legislation fails the consumer in that it has not adopted more stringent requirements as to the accuracy of information being published.
Common sense dictates additional information being allowed to be recorded would increase the prospect of such information being wrong. For too long the system has relied on credit providers to report accurate information.
Credit Providers are motivated by the collection of their debt. They are not motivated by the needs and rights of consumers in having their credit file depict a true picture as to credit worthiness.
Further, the new proposals once again are a cause for frustration in that there is a distinction drawn between consumer and commercial credit. Commercial credit has been hung out to dry and is not legislated for.
Credit worthiness should and must be taken seriously. A credit check should be conducted prior to lodging an application for finance, so as to avoid nasty surprises.
Individuals should be equipped with sufficient understanding as to the workings of a credit file and how to identify mistaken entries which may cause an application for finance to be declined.
An alliance with companies who specialize in repairing credit files is imperative if a problem appears. Only time will tell us the true impact the new credit reporting legislation will have on borrowers.
Readers should note the opinion expressed in this article is the opinion of Joseph Trimarchi Solicitor of Joseph Trimarchi & Associates a law firm specializing in Australian Credit Reporting Law. This article is designed for educational purposes only in adding to commentary for the purposes of agitating issues arising from the proposed credit reporting legislation, it is not designed as legal advice. Any party requiring legal advice should consult with a legal professional who has sufficient understanding of this field of law.
Joe can be reached at joe@josephtrimarchi.com.au or phone 9890 4811
