Damian Paull

Commonwealth Attorney-General, Senator the Hon George Brandis QC, has today requested the Credit Reporting Privacy Code (CR code) be varied so that the five day grace period for late payments recorded on a consumer’s credit report is extended to 14 days.

As the CR code developer, ARCA will make an application to the Office of the Australian Information Commissioner to vary the CR code, which went live following the start of comprehensive credit reporting in Australia on 12 March.

“Given the concerns raised by the community and reflected by the Attorney General on this matter, we agree that a 14 day grace period is an appropriate compromise before a late payment is recorded as Repayment History Information,” ARCA CEO Damian Paull said.

Comprehensive credit reporting features the inclusion of Repayment History Information which shows payments which were made or missed for each month over a 24 month cycle on a consumer’s credit report.

Understanding the difference between late payments and defaults

Repayment History Information helps improve the accuracy of predicting the credit risk of consumers, which will help lenders meet their responsible lending obligations. Ultimately, comprehensive credit reporting will ensure more consumers get better access to credit.

“It’s important consumers understand the difference between late payments and defaults,” Mr. Paull said.

“One late payment on your credit report is less serious than a default.  Any of us can be on holidays or forgetful, and a late payment can be offset by an overall positive history of paying most accounts on time. Defaults on the other hand are always more serious,” he said.

As of 12 March 2014, defaults can only be recorded on your credit history if the payment is more than 60 days overdue, is for a debt of more than $150, and you have received written notifications prior to the listing of the default.

“It’s also important for consumers to understand that only credit providers with an Australian credit license can report and obtain Repayment History Information – so late telecommunications or utilities bills will not be included on your credit report,” Mr Paull said.

ARCA has developed www.creditsmart.org.au to help consumers navigate the changes to the credit reporting regime and understand their new consumer rights.

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Credit reports previously only featured negative information about an individual’s credit history, such as defaults and enquiries, but from today some credit providers who choose to participate in comprehensive credit reporting (CCR) will also be able to share and access additional information such as repayment history information. These reforms will provide a clearer picture of a consumer’s ability to repay debts, enable better matching of consumer credit needs and give fairer access to credit with increased consumer protection.

Independent research commissioned by ARCA found the vast majority of consumers recognise the importance of having a good credit report, as either important (67%) or very important (21%). When consumers were informed about the changes, over half (53%) felt the new system will make things better for them, while 42 per cent believed they would be no better or worse off. One in four (25%) consumers feel stressed when it comes to managing credit and their own personal financial situation.

ARCA CEO Damian Paull said the positive response from consumers to the reforms to credit reporting  were encouraging.

“Consumers see the new credit reporting system as more consumer centric – and a second chance for the “not so good payers. Dealing with finances is not always easy so it’s promising Australians are becoming more aware of credit reporting and taking steps to manage their credit footprint and financial future,” said Mr Paull.“

Last month, with the assistance of Australia’s largest financial institutions and credit reporting bodies, ARCA launched their consumer education website www.CreditSmart.org.au to help improve consumer understanding of the credit reporting changes.

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Timothy Pilgrim

Ahead of the impending overhaul of Australia’s credit reporting system, the Australian Retail Credit Association (ARCA) yesterday launched a new straight-talking website CreditSmart.org.au.

The site provides a range of tools and tips to help educate consumers about the basics of credit reports and how they can proactively manage their credit history.

In March 2014, reforms to Australia’s Privacy Act will see extensive changes in the credit reporting system including the introduction of the Credit Reporting Privacy Code, which was drafted by ARCA at the invitation of the Privacy Commissioner, Mr Timothy Pilgrim.  The reforms will:

• Provide a clearer picture of a consumer’s ability to repay debts, which may enable providers to make more accurate and better informed lending decisions
• Enable better matching of consumer credit needs, which may reduce the risk that consumers commit to repay more credit than they can afford
• Give fairer access to credit and increased consumer protection

The launch of CreditSmart.org.au is the first step in ARCA’s consumer education campaign, aimed at helping all Australians take more control over their credit reports by providing unbiased and fair information.

“It is important consumers are aware of these changes as they will affect what is in their credit report and what information can be accessed by credit providers. Together with many of Australia’s largest financial institutions and credit reporting bodies, we’ve built CreditSmart.org.au to help improve consumer understanding of these changes,” ARCA CEO Damian Paull said.

Aussie spending habits are a good reason to get CreditSmart

Australians currently have about $34 billion in credit card debt, and research suggests that around 13 per cent of people pay only the minimum repayment off their account each month.  Considering Australians spent around $24 billion on credit cards in the lead up to Christmas, it seems we are still using credit to finance our everyday purchases – although our balances are falling.

Credit reports are routinely requested by organisations when consumers apply for loans, mortgages, credit cards or even a mobile phone plan. Credit reports historically only featured negative information about an individual’s credit history, such as defaults, but this will start to change from March 2014 when some credit providers who choose to participate in comprehensive credit reporting will also be able to share and access additional information such as repayment history behaviour.

According to independent research commissioned by ARCA, 59 per cent of consumers have not heard of credit reporting.  Those who had heard of it predominantly associated it around ‘negative’ aspects of their credit worthiness.

“While the launch of CreditSmart is an important step towards improving consumer understanding of these changes, the fact is most consumers don’t understand what their credit report is for and how they can use it to their advantage when using credit in a sensible way. We want to empower Australian consumers to take control of their credit report to assist them to better manage their financial position,” Mr Paull concluded.

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