THE CREDIT card bills have begun rolling in, signalling it’s time to start paying for the fun we had over the festive season.
It’s timely then that the Australian Law Reform Commission (ALRC) is calling for public comment on whether credit reporting laws need to change.
Generally, current credit reporting provisions in the Commonwealth Privacy Act only permit the collection and disclosure of personal information that indicates a person’s lack of credit worthiness, such as failure to repay a loan.
However, many lenders argue that comprehensive reporting that includes information such as an individual’s current credit commitments and repayment history would allow them to more fully assess a person’s credit risk, which in turn could improve competition and reduce interest rates.
The ALRC will review the current laws, whether any changes would benefit consumers, and how any changes would be regulated.
ALRC Commissioner in charge of the inquiry, Professor Les McCrimmon, said that compared to other countries, Australia’s credit reporting laws are quite strict.
“Other countries have more comprehensive credit reporting, such as the US and UK, allowing more information on a credit file. Ours is one of the more restrictive regimes so we certainly take a comparative approach to look at best practice around the world,” he said.
A number of previous government inquiries since the 1980s have rejected calls for comprehensive reporting on the basis that would not be of public benefit.
Carolyn Bond, co-CEO of the Consumer Credit Legal Centre (CCLC), said there are pros and cons to comprehensive reporting.
“Some consumers might be better off and some worse. We could see a greater range of interest rates — which would be good if you could get a cheaper credit card, but some people would pay more,” Bond said.
She pointed out that while research indicates comprehensive credit reporting leads to more lending to disadvantaged groups, whether that lending is affordable or simply leads to more debt problems is unknown.
One of the key regulatory issues with comprehensive credit reporting would be consumer privacy. With credit information now required as part of so many day-to-day transactions, such as setting up a mobile phone account or buying furniture on interest-free terms, the CCLC is concerned at the range of businesses that could gain access to the information.
Bond said it should only be available to finance providers. “For individual consumers, the main issue is that more of their personal information would be kept with a credit reporting agency and accessed by lenders as well as electricity companies, telephone companies — even orthodontists. Depending on what additional information could be kept, this might include just a balance of debts you owed, but could also include records of all your accounts and all payments made. Many people would think that this is quite an invasion of privacy,” she said.
The ALRC will also consider whether other reform measures such as new and separate legislation are needed to regulate credit reporting.
“The issue is that the regulation of credit reporting is currently in the Privacy Act and some have suggested it would be better in financial regulation legislation — be that existing or separate legislation, McCrimmon said.
“Some have also suggested it would be better regulated by someone other than Privacy Commissioner.”
Submissions to the ALRC’s Issues Paper 32, Review of Privacy—Credit Reporting Provisions, close on 9 March 2007.
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