Earlier this year, financial services stakeholders were invited to submit their responses to the exposure draft of the National Consumer Credit Protection Amendment (Mandatory Comprehensive Credit Reporting) Regulations 2018.
The legislation will amend the Credit Act to mandate that lenders share comprehensive credit information with credit reporting bodies. A voluntary regime of a similar kind has been in place since March 2014; however, low levels of participation have led the government to mandate it.
The CCR regime will require the four largest banks to supply 50 per cent of their active and open credit accounts by 28 September 2018. The information on the remaining open and active credit accounts, including those that open after 1 July 2018, will need to be supplied by 28 September 2019.
While some have argued that CCR and better data analysis could drastically improve the mortgage process by providing a more accurate risk profile of borrowers, the CEO of marketplace lender SocietyOne, Mark Jones, has suggested that mortgages will actually benefit the least from CCR.
Mr Jones elaborated: “There has been a big move forward in the ability of fintechs like ourselves to use data in the marketplace and we've seen the move towards open banking. The first step is comprehensive credit reporting, which has now gone live, and this gives fintechs like us the ability to use data to understand customers and meet consumer needs and make their life easier. This is really important because our business is all about making our customer's lives easy.
“But I think CCR is probably going to impact mortgages least. What it does mean is that people who are good payers, that will be clearly evident on their credit file. Whereas, in the past, the only thing you could see is if people didn’t have a problem.
“Going forward, we will be able to see people's behaviour. We always say that, in credit, there is the quality of the income stream that services the loan, there is the quality of the asset, but the big part of it is the quality and character of the borrower.
“Comprehensive credit data lets you form a much better view of the character of the borrower and I think that means that new finance companies like ourselves will be able to form a judgement on a customer's character much more easily. But for the big banks, they already have a lot of that information about customers so it is less important for them. As such, I think it will it benefit other loan providers, such as fintechs, more so than the large banks providing the majority of mortgages.”
Mr Jones concluded: “The [banking] royal commission is having an impact on the access to credit, as the banks tighten up. It is having an impact on access to credit; both in terms of how easy the process is, and the confidence with which people view the larger banks.
“This is both a positive and a negative. In a positive sense, customers are now much more willing to look at alternative suppliers of finance, such as ourselves. But, on the negative side, the obligations and the oversight are quite material in terms of the expectations on finance providers to understand the customer situation and deal with that appropriately.
“For someone like SocietyOne, we're trying to solve those things digital. For other lenders, I think it will take them a lot longer to catch up.”
[Related: AI could transform loan servicing: S&P]
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Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.