Consumer Data Right to improve mortgage process: ACCC

Speaking at the National Consumer Data Policy Research Centre on Friday (13 July 2018), the chair of the Australian Competition and Consumer Commission (ACCC), Rod Sims, said that the impending Consumer Data Right (CDR) is a “fundamental” reform that will help “cut through” the mortgage application process and make product search and comparisons easier and cheaper for borrowers.

“It is often difficult and costly for borrowers to compare the offers of mortgage providers. Discounts off standard variable interest rates are opaque,” Mr Sims said.

“Borrowers often have to lodge an application and provide substantial personal information in order to confirm the interest rate a mortgage provider is willing to offer. The Consumer Data Right will cut through the hassle factor of making comparisons and will reduce the cost to borrowers of discovering and comparing offers.”

Mr Sims further noted that it’s largely businesses that are benefitting from customer data, rather than the customers themselves, stressing the need for there to be a greater balance in power. As such, a key feature in the open banking regime is that data is only accessed by trusted parties who have explicit informed consent from the customer and that the purpose for which the data will be used is also clear to the customer.

“The Consumer Data Right is essentially a data portability right. We believe it will enable consumers to actually benefit greatly from the data that businesses already hold about them,” the ACCC chair said.

Mr Sims expressed that markets work more effectively when consumers are informed “about the price and quality of offers available to them, the costs consumers incur when switching between providers are small and barriers to entry for new providers are low”. He reiterated that this was not the case in mortgage markets.

The chair also said that government intervention is justified as banks “cannot be relied upon to make this data available themselves without legislative push from the government”.

The ACCC, which has a leading role in the design and implementation of the Consumer Data Right as well as in educating consumers about the right and accrediting third-party data recipients, has proposed that all major banks make data available on credit and debit card, deposit and transaction accounts by 1 July 2019, and on mortgages by 1 February 2020.

The deadlines for the remaining banks are extended by 12 months to 1 July 2020 for credit card, deposit and transaction accounts, and by 1 February 2021 for mortgages.

However, there are challenges ahead that the competition watchdog will need to tackle before the Consumer Data Right is enforced, Mr Sims acknowledged, such as ensuring strong data privacy and security standards are established.

The ACCC will be working with the Office of the Australian Information Commissioner on privacy matters and will continue cooperating with Treasury, CSIRO’s Data61 and other parties to determine which aspects of the UK’s open banking model can be replicated in Australia.

“Robust privacy protection and information security will be a core feature of the CDR. Ensuring trust and integrity in the CDR system are essential to its success,” Mr Sims said.

The competition watchdog has set up a dedicated Consumer Data Right Branch and will consult with consumers and businesses on various aspects of the opening banking regime including the CDR.

The Consumer Data Right will initially apply to the banking industry and will be rolled out across other sectors including energy and telecommunications.

[Related: Australia’s impending Consumer Data Right an ‘ambitious policy’]