Better Deals on Loans?
The Turnbull Coalition Government on the other hand is ensuring Australians can get better deals on their loans by introducing legislation to enact Mandatory Comprehensive Credit Reporting.
This is game changer for both consumers and lenders. It will boost lending competition and provide Australian households and small businesses with better access to finance. That is the hope, until we see the evidence.
Mandatory Comprehensive Credit Reporting will ensure lenders have access to a deeper, richer set of data, encouraging new entrants and small lenders, including innovative FinTech firms, to compete for small business and retail customers with “positive” credit histories. I hope they will not anymore discount newbies or experience.
FinTech has had a lot of attention, particularly in the media, but consumers that use FinTech are still few. Another worrisome trend is as soon some FinTech show promise, that banks are keen to take them over, even buy them out and take them off the market. Free market actions that are unfortunately legal but not in the spirit of this legislation at all.
One of the crucial aspects will be that not just negative data about consumers will be exchanged but also positive data that will give a fairer picture for credit assessment. For example, not just defaults, but also late payments and successful repayment will be able to give a more balanced picture. How this will play out is yet to be seen.
Comprehensive credit reporting is not a new principle in Australia’s regulatory framework. Lenders have had the ability to share comprehensive credit information on a voluntary basis since 2014 but have in many cases failed to do so. The major banks have failed to join and provide the critical mass necessary to attract other credit providers into the system.
The National Consumer Credit Protection Amendment (Mandatory Comprehensive Credit Reporting) Bill 2018 resolves this problem by requiring the four major banks to supply 50% of their comprehensive credit reporting data to credit reporting bodies by 1 July 2018, increasing to 100% a year later.
The Government does not propose to extend the mandate beyond the major banks at this point in time, as once the major banks begin supplying information, strong commercial incentives will encourage other lenders to participate, so the theory goes.
The major banks and credit bureaux are well-placed to meet the timeframes and requirements set out in this Government Bill, which align closely to the existing industry standards, the Principle of Reciprocity and Data Exchange (PRDE).
The Government acknowledges the efforts of industry in developing the PRDE and expects to give effect to restrictions on on-sharing set out in the PRDE through regulations that will be released for consultation in due course.
This Government Bill, aimed to become legislation, also strengthens the security arrangements around consumer data by placing new obligations on the major banks to be satisfied with the security arrangements of the credit reporting bodies prior to supplying data. Credit reporting bodies will also have a new obligation placed on them as to where consumer credit data can be stored.
The Government is aware of the differing views held by industry and consumer advocacy groups around the reporting of special payment arrangements. The Office of the Australian Information Commissioner has published guidance which provides certainty as to how these arrangements will be reported under existing laws.
Enter the AG!
The Attorney‑General (AG) will also be leading a comprehensive review of the operation of hardship arrangements under the Privacy Act. The review will respond to concerns raised by industry and consumer advocacy groups around how hardship arrangements are treated and will make recommendations on whether reforms are required.
The Attorney-General is expected to complete the review by late 2018. We can only hope the Federal Elections will be held after that.
We may well end up with a revisionist Labor Government that could want to re-examine the legislation in full. This would give the banks an excuse to stall its implementation.
Like so many things in Australia, process takes its time and toll. One aspect that worries many observers is that the big banks will consider smaller lending unprofitable, pullout and thus reduce competition which would likely increase the borrowing costs for smaller customers.
This outcome would also defeat the effectiveness of the legislation as it applies only to the big players.
It is also not assured that the Australian economy will be able to sustain growth should trade tensions or other geopolitical upheaval impact interest rates, exchange rates or money supply.
What is your take, will the Turnbull Coalition Government succeed in giving all Australians a chance of better deals on loans?
D. Don’t care?
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