Tougher stand taken on credit files
John Kavanagh June 30, 2012
Credit reporting agencies will get greater access to your information in exchange for stronger consumer protection.
The information held on consumer credit files will change in the coming year so that lenders, utility suppliers and telcos can find out more about the way we use credit.
OUR NOTE: If you have concerns please give Equitimax a ring and we can check your credit rating with Veda and advise on your current position.
The government has agreed to make Australia's credit reporting system more comprehensive in return for tougher consumer protection. Consumers have access to their credit files and the right to demand that mistakes are corrected. With big changes on the way - which will involve more information going into files - this is a good time to check your credit file and make sure there are no incorrect entries.
And it is not just low-income earners who are affected.
Veda Advantage, Australia's biggest credit reporting agency, says while people living in ''blue-collar areas'' account for the majority of default listings on credit files, that profile has been changing and there is now a broader spread of people affected.
Under the current reporting arrangements, a credit reporting agency can include the following information in a credit file: payment on a credit contract is at least 60 days overdue; a cheque for $100 or more has been dishonoured twice; a bankruptcy order has been made against the individual; a credit provider considers that the individual has committed ''a serious credit infringement''; the individual's current credit provider status; and details of recent credit inquiries.
The new scheme, which was introduced in an amendment to the Privacy Act by the Attorney-General, Nicola Roxon, last month, will allow credit reporting agencies to add the following information: the date a credit account was opened; the type of each current credit account (mortgage, credit card, personal loan and so on); the date a credit account was closed; the current limit of each open credit account; and repayment performance history.
The aim of the reforms is to facilitate better assessment of consumer credit risk by creating greater transparency. Information about repayment performance will be available only to licensed credit providers.
In return for giving the industry a more comprehensive view of the consumer's credit position, the government has included tougher consumer protection provisions in the amendment.
Consumers will be compensated if they are adversely affected by a contravention of the credit reporting provisions and courts will be given power to order compensation in cases where a civil penalty provision has been contravened. The new law includes a substantiation rule for corrections.
If a person requests a correction and is refused, the credit reporting agency or credit provider must furnish evidence to substantiate the correctness of the information.
A big problem with credit files is that errors creep in, because questions such as whether someone has committed ''serious credit infringement'' can involve a degree of subjective assessment. The Financial Ombudsman Service reported last month that it was dealing with several disputes in which consumers raised concerns about serious credit infringement listings on their credit files.
The Ombudsman found that credit providers did not always investigate sufficiently to determine that the consumer's actions indicated they were not going to comply with credit obligations. The Ombudsman also found a lender that was listing commercial debts on consumers' credit files. Commercial debt does not fall under the legislation.
''Errors in credit listings continue to be an area that raises systemic issues,'' the Ombudsman said.
Changes to the credit reporting system were first proposed by the Australian Law Reform Commission in 2008, and those recommendations were accepted by the government the following year. Change has been slow in coming because the issue has continued to be hotly debated.
The Consumer Action Law Centre has argued that some lenders target borrowers who have a high likelihood of defaulting because they pay high fees, rates and penalties. More detailed credit files allow those lenders to identify targets more easily.
The joint chief executive of the centre, Carolyn Bond, says all the overseas research shows that more comprehensive credit reporting leads to more lending and ''we are putting a lot of trust in lenders''.
Lenders have argued that the current system forces them to rely on a ''very limited snapshot'' of the credit applicant.
Access Economics has produced a report that says more comprehensive reporting would help overcome financial exclusion. A small number of adult Australians have no access to credit.
Access says lenders that rely on the current credit reporting system have to fall back on information about income when assessing credit applications.
One result is that people on low incomes may miss out on credit, even though they could service a debt. A more comprehensive report would highlight the fact that they had a good repayment history.
Beware credit repair companiesThe co-ordinator of the NSW Consumer Credit Legal Centre, Karen Cox, says consumers should be wary of dealing with credit repair companies, which, in some cases, charge large upfront fees to investigate a consumer's credit file and ''clear'' the file. Cox says some consumers are being charged hundreds of dollars for having errors in credit files corrected, which they could do themselves for nothing.
In other cases, the credit repair companies have used aggressive tactics to try to persuade the lender or credit reporting agency to remove legitimate listings. And in some instances that Cox's staff have dealt with, the credit repair company has persuaded the consumer to enter Part IX insolvency arrangements, which they subsequently administer for a fee.
''It is a completely unregulated area,'' Cox says.
Australia's two main credit reporting companies, Veda Advantage and Dun & Bradstreet, provide access to credit files, via their internet home pages.
OUR NOTE: Websites referred above are:
Veda offers an alert service that informs consumers of any changes to their credit file.
Consumers should try these services first and take the matter to a dispute resolution service if unhappy with the outcome. A credit repair company might be an option as a last resort.
Read more: http://www.smh.com.au/money/borrowing/tougher-stand-taken-on-credit-files-20120629-217q4.html#ixzz1zjisoDLn