Comprehensive credit reporting has again come under the spotlight for its potential advantages and disadvantages for lenders and consumers alike. We look at what you should be watching out for with your credit file when the comprehensive credit reporting regime is instigated in the near future.
By Graham Doessel, Founder and CEO of MyCRA Credit Repairs and www.fixmybadcredit.com.au.
Last week, Head of Legal at Veda Advantage, Olga Ganopolsky defended the incoming positive credit reporting regime in Broker News, claiming the new laws would help to alleviate consumers inaccurately reporting their credit situation to lenders.
Ganopolsky argued that the wider array of information available in the new reporting regime will enable lenders to make more informed risk decisions. She claimed the regime carried a “strong link to responsible lending”.
“When research is done on bankrupts, the astonishing results were that more than 95% of people in bankruptcy were applying for credit virtually on the eve of bankruptcy. A lot of even solid credit individuals don’t provide accurate credit information. Just under 20% of people don’t accurately report,” Ganopolsky said.
Critics of the regime say it violates consumers’ privacy and places the burden of proof on consumers should lenders make a mistake. And though Ganopolsky claimed the regime would enable more responsible lending decisions, NSW Consumer Credit Legal Centre director Karen Cox has pointed out that a positive credit reporting regime existed in the United States during the subprime mortgage crisis,” Broker News reports.
The introduction of additional information onto consumer credit reports in Australia is unfortunately not going to impact consumers in a ‘positive’ way.
Unfortunately, the new comprehensive credit reporting regime just opens another door for creditors to inaccurately report information on consumer credit reports – but this time there is no forewarning.
The information can be recorded if payments are one day late. One of the major issues we have with the proposed new laws is the ability for creditors to list late payments on a person’s credit file.
Under current Australian credit reporting legislation, late payments are not noted on a person’s credit file until they pass to the ‘default’ stage – which is more than 60 days in arrears.
The creditor is also bound to fulfil a series of requirements to give the consumer the opportunity to rectify the situation before listing the default – and are bound to notify the consumer of their intentions to ultimately ‘list’ the late payment of 60 days or more as a default on the consumer’s credit file.
This legislation will remain, but the Government also proposes the introduction of the ability for creditors bound by the NCCP to make late payment entries on a person’s credit file if their payments are late even as little as one day.
So all the rigorous Australian credit reporting laws for listing defaults remain, except a creditor can now tarnish a person’s credit file with late payment ‘notations’, which would surely have a big impact on their ability to obtain credit. If the late payment of a few days is due to delays in bank processing of transfers or direct debits, paying at Australia Post, BPay etc. – these things are beyond the control of the average consumer yet that is exactly who will get hurt.
There can be a host of reasons why a consumer makes a payment late – illness, holidays even simply the mail going astray – but we don’t believe this reflects unduly on the consumer’s ability to service a loan – but will it?
In these harsh economic times, any negative listing impacts a person’s ability to get a home loan. Even excess credit enquiries. So the ‘noting’ of late payments on a person’s credit file could mean they are refused credit.
Creditors make mistakes every day when it comes to listing defaults and other official ‘negative’ listings on credit files. Luckily the consumer has an extensive legislative framework and system of redress should the creditor get it wrong and their credit file happened to be reported unfairly or inaccurately.
Who is going to be the watchdog when it comes to these late payment ‘notations’? As is currently the case, it is up to the consumer to check the accuracy of their own credit file. What system of redress will be in place if they find a creditor has listed a ‘late payment’ on their credit file unfairly or incorrectly?
We guess the old adage will remain – consumers will continue to be responsible for the information that is reported about them by creditors on their credit file.
With this in mind it will continue to be essential for consumers to check the accuracy of their own credit file on a regular basis – and particularly before they apply for any credit.
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