Government plan welcomed by some but raises red flags for others
The Canadian government’s plan to have rent payments factored into credit scores to level the playing field for renters seeking homeownership has drawn mixed reactions.
Industry leaders welcome the move, while renter advocates express concerns about potentially negative impacts, particularly for low-income tenants, The Canadian Press reported.
Rental reform industry support
Companies facilitating rent reporting, like Borrowell, Equifax Canada, and FrontLobby, voiced support for the plan. They also anticipate increased demand for their services as awareness of the program grows.
"We’ve been saying for a couple of years now how important it is for consumers to be able to report rental payments to build up their credit history, so I was pleased to see the government taking some action," Borrowell CEO Andrew Graham said.
Prime Minister Justin Trudeau pointed out the disparity between renters, who gain no equity from their monthly payments, and homeowners, who accumulate equity with each mortgage payment, ultimately improving their creditworthiness.
Equifax Canada, a major credit bureau, supports the plan.
"We look forward to working with the governments, the banks, and other lenders to ensure this important evolution in the credit infrastructure in Canada is implemented responsibly," Equifax Canada CEO Sue Hutchison said. What we’ve been telling the government and, frankly, anyone who will listen is that what we really need is open banking.”
Zac Killam, CEO of FrontLobby, which offers rent reporting services, hopes this will raise awareness of the benefits, especially for those without established credit histories.
"The level of awareness is very low, it’s not well understood ... particularly for the portion of the population who it benefits the most," Killiam said.
A 2022 Equifax report revealed that more than three million Canadian adults don’t have a credit score. Seven million have limited data, which Equifax said could restrict their ability to access credit products.
FrontLobby, however, utilizes a landlord verification model. Its study with Equifax found that on-time rent reporting became the only source of credit data for nearly half of their users.
"They’re able to reflect all their years of on-time payments on their credit report, which can have obviously tremendously big benefits to their credit report," said Killam.
Renter advocates raise concerns
On the other hand, Prosper Canada CEO Elizabeth Mulholland warns that the system could harm renters struggling financially, emphasizing the need for consumer control over data sharing.
Mulholland stressed the importance of ensuring individuals have control over whether their rental payment data is shared with credit bureaus.
"It’s a double-edged sword. If you just blanket build it in, that could be problematic for a lot of low-income and vulnerable people," she said. “You don’t want to set those people further behind. And those challenges go right up the income scale well into the middle class."
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Douglas Kwan, of the Advocacy Centre for Tenants Ontario, fears landlords could exploit the system to pressure tenants, particularly those involved in disputes over rent payments.
"Their bargaining powers are so much stronger than tenants already, and so when you add these private reporting mechanisms that are run by the landlord ... it’s not only problematic, it’s dangerous," said Kwan.
Implementation details remain unclear
The exact rollout of the government’s plan is yet to be revealed, with further details expected in the upcoming budget.
The Canadian Bankers Association said it will assess the impact, while TransUnion Canada is already exploring how to incorporate rental data responsibly.
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