Chapter 10
Committee conclusions
10.1
The credit reporting Exposure Draft represents a significant step in the
reform of credit reporting in Australia. The Exposure Draft implements a more comprehensive
credit reporting regime in place of a regime which is seen as being outmoded,
cumbersome and inadequate for today's complex finance sector.
10.2
Under the proposed regime, the types of information which credit
reporting agencies and credit providers can collect, use and disclose for
credit purposes is expanded, including five new data sets. In addition, the
regime will apply to a wider range of credit reporting agencies and credit
providers.
10.3
While consumer advocates raised concerns about access to greater amounts
of information, for example, that it may allow credit providers to impose
unfavourable terms on vulnerable customers, the committee supports the move to
a more comprehensive credit reporting system. The new credit reporting system
supports responsible lending by providing a clearer picture of a consumer's
ability and capacity to repay a debt. This will assist in ensuring that
consumers do not over commit themselves, particularly those consumers who are
disadvantaged or in a vulnerable position. The credit reporting system will
also increase competition between large and small lenders thereby benefiting
consumers.
10.4
Submitters to the inquiry raised a number of concerns including the
complexity of the draft, the need for greater clarity of provisions and the way
in which provisions may work or be interpreted. As the new requirements have
been provided as an Exposure Draft, no Explanatory Memorandum was available.
The committee considers that many of the matters raised will be clarified in
the Explanatory Memorandum. In addition, as with the Australian Privacy
Principles, many matters will be addressed in guidance from the Office of the
Australian Information Commissioner.
10.5
The committee also notes that the Credit Reporting Code of Conduct is
being developed in consultation with stakeholders. The Code is an important
mechanism in ensuring that credit reporting agencies and credit providers know
how to practically apply the credit reporting provisions. It will also address and
clarify many matters raised during the committee's inquiry. In addition, the
Code will ensure that the credit reporting system remains flexible and
responsive to future challenges and developments.
10.6
There were, however, substantial comments in relation to the complexity
of the Exposure Draft. The committee notes concerns that this makes the
Exposure Draft less user-friendly and may undermine consumer protections and
rights. It was also argued that the complexity of the Exposure Draft makes it
difficult for credit reporting agencies and credit providers to understand and
meet their obligations. The committee acknowledges these concerns however, the
credit reporting system involves large amounts of information which flow
between multiple entities. The Exposure Draft proposes to regulate these
information flows at each stage to ensure adequate information protection.
However, the committee considers that there are some avenues for improving the
clarity of the Exposure Draft and has made recommendations in relation to
definitions, the use of certain terms and the need for consistency across the
consumer credit regulatory regime. In relation to comments about the complexity
of definitions, the committee has acknowledged that there are many new
definitions, but these reflect the complexity of the information flows and
information use in the credit reporting system. The committee did not support
the proposal for a single definition of regulated information as this would
involve a major re-drafting of the Exposure Draft and does not reflect the
current business model of the credit reporting sector.
10.7
During the inquiry, a number of industry stakeholders and consumer
advocates undertook consultations on five major issues: identity theft; serious
credit infringement; hardship flags; complaints handling; and the
simplification of definitions. The committee sought the response of the
Department of the Prime Minister and Cabinet to the outcomes of the
consultations. The committee has recommended that consideration be given to
matters in relation to serious credit infringements so that those listings that
do not relate to intentional fraud are dealt with in a different way. This new
approach would apply particularly to instances where utilities and
telecommunications debts were not paid because of inadvertently failing to
provide a change of address notification to a utilities or telecommunications
provider. In relation to identity theft, the committee did not support a change
from a 'ban' to a 'flag' mechanism. However, the committee made recommendations
in relation to ensuring the intent of the Government's response to the ALRC's recommendation
in this regard is adequately provided for in the Exposure Draft and that
consideration be given to extending the initial ban period from 14 days to 21
days.
10.8
Much evidence was received in relation to hardship provisions. The
provision of a hardship 'flag' was not supported by the ALRC. However, credit
providers supported such an approach. The committee considers that there are
circumstances where a consumer will request a change of credit arrangement
because of a change of circumstances, for example, illness. Credit providers
also provide consumers with changes to arrangements in response to natural
disasters and other events. In these circumstances, the new arrangement is
entered into before a default is listed. The committee considers that
consideration should be given to allowing these changes to the terms or
conditions of an arrangement to be included as an individual's credit
information.
10.9
In relation to the complaints handling process, submitters commented on
the perceived complexity of the new arrangements. The committee notes that much
of the evidence did not support a separate 'correction' and 'complaints'
process. However, the committee was not of this view as there is significant
merit in allowing for corrections to be handled quickly through the correction
process before a consumer proceeds to a complaints process.
10.10
The committee has made recommendations in relation to a range of
specific provisions. Many of these recommendations recognise that matters should
be dealt with in the Credit Reporting Code of Conduct or that terms should be
clarified. In particular, the committee has recommended that the meaning of
'access seeker' be reviewed to ensure that consumers may continue to use the
National Relay Service to access their credit reporting information without
overly onerous requirements.
10.11
In conclusion, the committee considers that the Exposure Draft
comprehensively addresses the recommendations of the Australian Law Reform
Commission and implements an effective credit reporting system that protects
consumers' rights and assists responsible lending by credit providers.
Senator
Helen Polley
Chair
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