Mandatory CCR is about ‘financial inclusion’: Equifax

According to Equifax Australia, there are about 200,000 Australians (as of August 2018) that have a historic black mark on their credit report, representing a default, judgement or bankruptcy that occurred over four years ago. Yet, that negative indicator can impact a consumer’s ability to access credit or better deals years after the event.

Mike Cutter, Equifax’s group managing director for Australia and New Zealand, said that the changes to credit reporting, under the impending comprehensive credit reporting (CCR) regime, are about “financial inclusion”.

In other words, it is about “giving people who have an old black mark on their credit report a chance to show they have recovered from a rough patch and are now making the regular repayments on their credit accounts”, Mr Cutter continued. For such consumers, CCR could open up access to cheaper interest rates or better deals.

The reforms could also benefit those among Australia’s 2.85 million owner-occupied households that pay their minimum monthly mortgage payments on time, according to Equifax Australia.

“The majority of consumers make repayments on time each month, but this has not been shown on their credit report until now,” Mr Cutter said.

“These reforms are about providing a more accurate picture of consumers and giving them the opportunity to showcase their positive repayment behaviour.”

While the National Consumer Credit Protection Amendment (Mandatory Comprehensive Credit Reporting) Bill 2018 is yet to receive Royal Assent, Australian Retail Credit Association (ARCA) chair Mike Laing said that the major banks are committed to the CCR regime regardless of what happens in Parliament in the coming weeks, and many non-majors and fintechs are already on board, including Citibank, HSBC, Teachers Mutual Bank, RateSetter and MoneyPlace, among others.

According to Mr Laing, ANZ, Commonwealth Bank and Westpac will be accompanying NAB as participants of the comprehensive credit reporting regime by the end of this month, which was the government-imposed deadline for the major banks to provide 50 per cent of their CCR data to credit reporting bodies.

NAB was the first major bank to sign the “Principles of Reciprocity and Data Exchange” (PRDE) agreement, which the Australian Retail Credit Association (ARCA) said has been designed in consultation with the industry to facilitate the sharing of credit data among signatories by setting up a reciprocal data exchange.

The remaining three are preparing to input their data into the PRDE by 30 September 2018.

According to Equifax, the National Consumer Credit Protection Amendment (Mandatory Comprehensive Credit Reporting) Bill 2018, expected to be debated in Parliament in the coming weeks, would require the major banks to “report when minimum payments on a credit card, mortgage or personal loan are being made on time… alongside additional information that will better show the actual credit commitments position of a consumer, rather than just how many credit enquiries they have made”.

Mr Laing said that the banks would likely exceed the 50 per cent obligation by the end of September, as they are starting with inputting their credit card portfolios (which are larger than other accounts) and could also be ahead of schedule with submitting 100 per cent of their CCR data by the same date next year.

[Related: Lenders committed to CCR regardless of legislation approval]