Australians will have their private financial hardship information included on their credit reports for the first time with the passing of the National Consumer Credit Protection Amendment (Mandatory Credit Reporting and Other Measures) Bill 2019.
While before, credit reports were only required to include credit inquiries, defaults and serious infringements, banks must now report more about the credit history of their customers to credit agencies; the additional details include account open and closed dates, types of credit, credit limits, financial hardship information and up to 24 months of repayment history.
While some are celebrating the change as a clear win for consumers, others have warned it could do more harm than good.
According to Australian Banking Association CEO, Anna Bligh, the new laws are welcome across the board – sure to result in both better deals for customers with a good credit history and better support for those experiencing financial difficulty.
“More information is better for customers as it gives lenders a more comprehensive picture of a customer’s financial situation,” she said.
“Having more information on their credit history means customers will have greater choice and more opportunity.”
Bligh emphasised that banks have programs to assist customers experiencing financial difficulty, which can only be put to use if customers inform their lender when they need financial assistance. Now, that will be done for them.
“This is good news for customers experiencing financial difficulty. Now, more context will help ensure customers’ credit histories are more accurate and reliable,” Bligh said.
Financial Rights Legal Centre CEO Karen Cox has a less optimistic take on the changes, given that the passing of this bill means financial hardship information will remain on a person’s credit report for twelve months or more, even if they were only in hardship for a brief period of time.
“Financial Rights is very concerned that people will shy away from seeking assistance from their lenders when [they] become aware of these changes,” Cox said.
“[We have] spoken with countless people who would rather continue to struggle with unsustainable payments or look for dangerous quick-fix solutions such as payday loans or expensive refinancing, rather than risk having what they perceive as negative information listed on their credit reports.”
Cox also used the more than 900,000 Australians who took hardship deferrals throughout the COVID-19 crisis to illustrate her concerns around the updated policy.
“Had this Bill passed in 2019, all of those people would now be branded with ‘hardship’ for upwards of 18 months or more,” she said.
“Their ability to get credit in the future could be severely affected, making recovery from a disaster even more difficult.”
