8 February 2018

Delivering Australians a better deal on their loans

Note

The Turnbull Government is continuing to act on delivering a better deal for bank customers – today releasing exposure draft legislation to mandate a comprehensive credit reporting regime.

This Bill is a game changer for consumers – leading to better deals on mortgages, personal loans and small businesses loans.

Customers with good credit histories will be able to obtain lower rates, and be better placed to shop around because their credit history will now become available to all lenders. Others, whose previous credit histories only included default rates, will also get a better chance to demonstrate their credit worthiness because there will be more credit information available on their reliability.

Supported by a comprehensive consumer credit history, many small business owners should gain better and faster access to credit allowing them to invest more into growing their businesses, employing more workers and paying them more.

The new credit reporting rules will help open up the lending market to competition by allowing new lenders entering the market to better assess credit risk, meet responsible lending obligations and at the same time reduce exposure to defaults.

This is good news for customers because it means that new entrants, including innovative FinTech firms, will be able to use comprehensive credit reporting information – removing a significant barrier to entry that currently exists in the system.

All of the four major banks have publicly volunteered to commit to contributing their credit data in the coming months. The draft legislation will require the major banks to supply 50 per cent of their comprehensive credit reporting data to credit reporting bodies by 1 July 2018, increasing to 100 per cent a year later - a 90 day transitional period has also been built into the draft legislation to give the major banks time to meet these deadlines. A new obligation will be placed on the major banks and the credit reporting bodies to demonstrate that they have met their initial bulk and on-going data supply requirements. Each time a credit provider doesn't supply updated credit reporting information, they will face penalties of up to $2.1 million. The Australian Securities and Investments Commission will be responsible for monitoring compliance with the new regime.

At this point in time, the requirement to participate in comprehensive credit reporting will not extend beyond the major banks, as there are strong commercial incentives that will encourage other lenders to participate in supplying and consuming comprehensive credit reporting data, once the major banks participate. The draft legislation however, will include the power to extend the mandate to include other credit providers in the future if needed.

The Government takes the security of consumer data seriously and has consulted widely with industry, regulators and security agencies on this matter. This Bill will place a new obligation on credit providers to be satisfied with the security arrangements of the credit reporting bodies prior to supplying credit reporting data. Credit reporting bodies will also have a new obligation placed on them as to where consumer credit data can be stored. This Bill builds on and compliments the existing protections established by the Privacy Act and Code and regulated by the Office of the Australian Information Commissioner.

The exposure draft of the legislation is available on the Treasury website.

Submissions are due by 23 February 2018. The Government encourages all interested parties to make a submission.