Wednesday 16 July 2014:
The Australian Retail Credit Association (ARCA) today responds to the Financial System Inquiry interim report released yesterday, welcoming the report’s consideration to include further information fields in relation to credit reporting in Australia, and advocating for industryself regulation of comprehensive credit reporting.
As the peak body for credit reporting in Australia, ARCA supports the addition of new credit information fields to the credit reporting system to enable improved risk management and better credit decisions.
ARCA is also currently overseeing the development and introduction of an industry-regulated reciprocal data sharing arrangement, which would remove the need for a mandatory comprehensive credit reporting (CCR) system.
The FSI report called for industry feedback on the benefits and costs of various policy options.
“We are pleased the panel have recognised the importance of comprehensive credit reporting to Australia’s financial system. We will be putting forth an industry view on the policy options described,” ARCA CEO Damian Paull commented.
Comprehensive credit reporting was introduced in March 2014, marking a shift towards a positive credit reporting system – whereby a wide range of positive and negative credit information is included in a consumer credit report. The move progressed Australia’s $1.49 trillion retail credit industry, bringing it in line with global peers.
The FSI report acknowledges the benefits of CCR, but observes no major banks have participated yet under current arrangements. The FSI report calls for views on policy options, which include making no changes to current arrangements, or expansions to CCR such as making CCR mandatory and/or adding new information fields.
ARCA supports industry self-regulation
ARCA believes CCR can support responsible lending practices and increase consumer access to responsible mainstream credit – but supports industry self-regulation rather than a mandatory approach.
“Reciprocity in its simplest form simply means you get what you give. We firmly believe a guarantee of reciprocity will encourage organisations to share information, and greater information will create a more level playing field among credit providers,” Mr Paull said.
ARCA is overseeing the development of a system of data exchange which will encourage credit providers to participate in the new comprehensive credit reporting system.
The initiative is intended to create a clear industry standard for the management of credit-related information which will be governed by industry.
“We have been working with our members to refine these principles, and we hope to announce the details in the coming months,” Mr Paull said.
ARCA supports addition of new fields
ARCA also supports the addition of extra data fields, for example, outstanding account balances and repayment history information from non-bank credit providers, such as telecommunications and utilities companies.
ARCA calls for the introduction of government debt data, such as tax debts, into the credit reporting system.
“This additional information would enable all credit providers to more accurately assess the creditworthiness of a borrower. Having a clearer picture of an individual’s indebtedness is crucial to the provision of responsible lending and responsible credit,” Mr Paull concluded.
