Proposals include adding more detailed consumer data and improving the regulation of credit repair services
Arca, the industry association focused on credit reporting and consumer data, has submitted 36 recommendations to modernise Australia’s credit reporting system.
The recommendations, submitted to the Review of the Credit Reporting Framework under Part IIIA of the Privacy Act, aim to adapt the system to meet 21st-century demands and support Australians effectively.
Arca’s proposals include adding more detailed consumer data, improving regulation of credit repair services, increasing credit reporting participation from lenders, telecommunications, utility providers, and Buy Now Pay Later (BNPL) services, enhancing financial hardship reporting, and updating the regulatory framework.
“The submission of these recommendations marks a significant step towards a more inclusive and effective credit reporting system in Australia,” said Richard McMahon (pictured right), general manager – government and regulatory at Arca, stressing that Australia’s credit reporting system is crucial to the nation’s economic infrastructure.
He added that positive data, such as liabilities and repayments, have streamlined application processes and provided better support from lenders during financial difficulties. Most Australians have also seen improved credit scores and better access to credit on competitive terms due to positive behaviour, McMahon said.
Arca argues that including more data, such as account balance and extensive repayment information, could improve credit scores’ usefulness, empower better lending decisions, and support further financial inclusion.
“While the credit reporting system is working well, it could do so much more to help consumers access credit on competitive terms,” said Arca chief executive Elsa Markula (pictured above). “Adding more data to the system – especially the kinds of data that are commonplace throughout the world - like account balance and repayments – would improve outcomes for consumers.”
The submission highlights that financial hardship reporting reforms have been beneficial and do not hinder future credit access.
“Lenders do not treat past financial hardship as a black mark preventing further lending. Rather, it’s a prompt to make sure they understand the consumer’s situation fully and make a tailored, informed decision,” McMahon said.
The submission also calls for robust regulation of credit repair services, noting that current practices mislead consumers into thinking their information is inherently negative.
“Credit repair firms offer to fix, clean or repair a credit report for a fee, but consumers shouldn’t be paying anyone to correct information: this can be done for free,” McMahon added. “The licensing of credit repair firms hasn’t improved the conduct of this sector, and stricter regulation is needed.”
Markula said they believe that the reforms will lead to better outcomes for all Australians, providing greater access to credit and supporting financial stability across the economy.
“Our proposals aim to ensure the system is fair, transparent, and capable of supporting the diverse needs of consumers and lenders well into the 21st century,” she stated.
With the review set to conclude by October 1, 2024, Arca emphasised the need for extensive consultation post-review to ensure all stakeholders can contribute to modernising the credit reporting system for consumers and the industry.
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