Our previous credit reporting system only allowed for the publication of negative information on a credit file.
The new system of 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 change from the old and preserve the rights of the consumer. Or will the consumer be once again short changed?
Back ground
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 Credit Reporting.
The reforms are significant and have been adopted as part of the new Australian Privacy Principles. From March of this year credit reporting bodies can disclose repayment history information to licensed credit providers. In turn the credit provides have argued this additional information will help them in determining your eligibility as to credit.
Changes
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 they are;
• The type of account.
• The date the account was opened.
• The date the account was closed.
• The credit limit placed on the account.
• The repayment history.
Our previous system allowed for accounts which were 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 be compliant 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 arguments 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 recorded on a credit file naturally increases the prospect of such information recorded in error. 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.
Caution
Consumers are cautioned to place higher significance as to the importance of the information contained in their credit file.
A credit check should be conducted at the beginning 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 indentify mistaken entries which may cause a loan to be declined.
An alliance with companies who specialize in repairing credit files is imperative if more loans are to be approved.
Only time will tell us the true impact the new credit reporting legislation will have on borrowers. In the interim make sure all loans and other forms of credit are paid on time and if a dispute arises make extensive notes as to what occurred these will at a later stage serve you well.
Disclaimer: Readers should note the opinion expressed in this article is the opinion of the Joseph Trimarchi Lawyer. This article is designed for educational purposes only in adding to commentary for the purposes of agitating issues arising from credit reporting legislation, it is not designed as legal or financial advice. Any party requiring legal or financial advice should consult with a legal professional who has sufficient understanding of this field of law or finance professional with sufficient understand of the loan process. Contact Joe at: joe@josephtrimarchi.com.au
