LAWFUEL – The Legal Newswire – Australia is one step closer to a consumer credit reporting model that can improve default rates and access to credit for under-served sections of the community, following the release of draft recommendations from the Australian Law Reform Commission (ALRC).
The ALRC has been conducting an inquiry into Australia’s credit reporting system as part of a broader inquiry into the Privacy Act. The inquiry was established following a two year campaign by Dun & Bradstreet (D&B) urging the Government to hold an inquiry into credit reporting and introduce reforms. D&B has also discussed this issue
with the New Zealand government.
Currently, Australia and New Zealand both operate under a negative reporting system in which credit bureaus are only allowed to record identification and default data. The ALRC Discussion Paper includes recommendations that would allow some minimal additional information to be placed on consumer credit reports:
• the type of each current credit account opened
• the date on which the current credit account was opened
• the limit of each current credit account
• the date on which each credit account was closed.
These recommendations reflect the model proposed by Dun & Bradstreet in 2004 as part of its campaign for reform.
Christine Christian, D&B Australasia CEO, believes the ALRC proposal is an appropriate balance between the extremes of the current negative only model and the full-file model that exists in the United States.
“There is no doubt that the greatest benefit to consumers would come from a model with as much quality data as possible” said Ms Christian.
“However this is a significant reform about which there are many different views. Dun & Bradstreet’s proposed model is an appropriate balance between those views.
“Introducing a limited model provides an opportunity to demonstrate the benefits that can arise from credit reporting reform. We expect the benefits will be recognised in New Zealand and the issue will be considered when the Privacy Act is reviewed early next
International research demonstrates that credit reporting reform can achieve:
• dramatic reductions in delinquency and default rates
• improved access to credit for those currently under-served – e.g. small business,
young people with good payment histories, and women
• macro-economic benefits such as less overall risk within the financial sector and
a contribution to the national economy worth $5.3 billion over the next decade.
“The evidence supporting reform is overwhelming and it should be embraced in both Australia and New Zealand,” said Ms Christian.