ACCC approval will transform credit in Australia

The Australian Consumer and Competition Commission (ACCC) has today approved a new principlesbased industry framework which will transform consumer access to finance in Australia. It will come into effect on the 25th of December. The framework has been developed by the Members of the Australian Retail Credit Association (ARCA).


The industry developed principles, the Principles of Reciprocity and Data Exchange (PRDE), encourage Credit Providers and Credit Reporting Bodies to share consumer credit information. More comprehensive information sharing will enhance credit outcomes for consumers, lenders and underpins a strong economy.


ARCA CEO Damian Paull said the ACCC’s decision was a major milestone in making credit reporting more comprehensive in Australia.


“As the peak body for the consumer credit industry, ARCA has championed the development of a voluntary industry-led framework for several years. This new principles-based framework will remove a major barrier to participation in comprehensive credit reporting (CCR), and enables the industry to move forward and share information with confidence. A strong credit system underpins a strong economy and sharing comprehensive information encourages significant consumer benefits.”


The authorisation of the PRDE represents a big step in Australia’s transition to CCR. CCR has been globally recognised for increasing the availability and affordability of responsible credit to borrowers. Recent analysis in Australasia has shown that lenders participating in CCR have reported a 10-20 percent increase in approval rates for new-to-lender applicants.


This authorisation follows the Australian Government’s response to the Financial System Inquiry, Improving Australia’s Financial System, which supported the industry approach to credit data sharing.


Prior to 2014 reforms to credit reporting laws, only negative data such as late payments and defaults were included on credit reports. The inclusion of positive information will improve the ability of credit providers to assess a consumer’s true credit capacity and make better lending decisions. Over time this will lead to greater access to credit for some consumers who had previously found it difficult to Australian Retail Credit Association demonstrate a good credit record and better tailored product aimed at ensuring that consumers are not given credit they cannot afford to repay.


The PRDE enables signatories to take advantage of the changes in the law and share positive information, such as on-time loan repayments, as well as negative data.


“These industry principles are critical to realising the benefits of comprehensive credit reporting as they create an open, transparent and standardised system for sharing credit data. The PRDE will deliver benefits to consumers and the wider economy,” said Mr Paull.


“Sound credit decisions, based on a well-informed and realistic assessment of risk are essential prerequisites for financial stability and sustainable economic growth. ARCA remains committed to supporting Australia’s innovative credit-providing sector as it transitions to this new system,” said Mr Paull.