Expand comprehensive credit reporting, say lenders

Comprehensive credit reporting (CCR), which expanded the information banks needed to report to credit agencies about their customers’ credit history, was made mandatory in February.

Previously, a credit report was only required to include credit inquiries, defaults and serious infringements, but under the amended law, lenders needed to share details such as account open and closed dates, types of credit, credit limits, financial hardship information and up to 24 months of repayment history.

The regime kicked off from July.

In a submission to the ongoing parliamentary inquiry into housing affordability, the Australian Finance Industry Association (AFIA) has suggested expanding the categories of lenders that can contribute to and access data from the CCR scheme.

The types of lenders the body has advocated for include buy now, pay later (BNPL) providers and online small-business lenders.

To access the CCR regime, lenders must hold an Australian Credit Licence (ACL) applicable to consumer lending and provide consumer lending data to credit bureaus and other credit providers.

Small-business lenders are thus excluded as they hold commercial instead of consumer data, whereas many fintechs, such as buy now, pay later (BNPL) providers do not need to have ACLs due to the nature of their products.

“To allow smaller, specialised and fintech lenders to participate in the CCR regime facilitates a more competitive environment, which in turn facilitates more customer choice,” the AFIA’s submission said.

“Access to data is important to manage credit risk, effectively compete with mainstream institutions and improve customer choice – customers that use these online lending products and look for finance from other market participants (e.g. home lenders) could benefit from a credit reporting system that facilitates exchange.”

Other recommendations to improve accessibility in the mortgage and housing market from the AFIA include:

• Expanding the government’s home-ownership schemes, including the First Home Loan Deposit Scheme, First Home Super Saver Scheme and Family Home Guarantee
• A further review of the APRA’s restricted authorised deposit-taking institute (ADI) licence requirements in 12 months, after the regulator reviewed and updated its process
• Speeding up the roll-out of open banking, by removing barriers to entry and supporting the expansion to all financial services as soon as practical. The AFIA has recommended providing more clarity around how the regime applies to a restricted ADI, to make it easier for a smaller participant to become accredited and increase consumer awareness
• Deepening debt capital markets. The AFIA has called for changing legal and tax settings to the corporate bond market to promote debt capital raisings, including bonds for infrastructure projects and affordable housing projects
• Reviewing overseas examples of affordable housing initiatives and consulting with lenders and the National Rental Assistance Scheme (NRAS) on approaches to better promote and scale affordable housing, for both buyers and renters

Further, the body has called for a new national housing strategy and action plan from the federal government, including suggested reforms around land planning and housing supply.

One of the suggested changes, is replacing stamp duty with property taxes.

“A new national approach to affordable housing must be based on government, business and community collaboration to promote choice in and access to housing finance, drive competition and innovation and support greater financial, and therefore social, participation across our community,” the submission stated.

[Related: Rethink capital gains tax, NSW tells federal government]