A new report from the Australian Retail Credit Association (ARCA) shows Australians are largely positive about the new credit reporting system set to be introduced next month, with 62% of consumers in full support.
The ARCA report ‘Credit where credit’s due: Consumer attitudes to changes in Australia’s credit reporting system’ highlights research conducted with independent research company Vision Critical to understand consumer reactions to the fast approaching credit reporting changes.
On 12 March 2014, reforms to Australia’s Privacy Act will see extensive changes to the credit reporting system including the introduction of the Credit Reporting Privacy Code drafted by ARCA. The reforms will provide a clearer picture of a consumer’s ability to repay debts, enable better matching of consumer credit needs and give fairer access to credit with increased consumer protection.
Three in four Australians (74%) believe the credit reporting system is either very important (33%) or important to them (41%). For Gen Y’s, 47% of 18-29 year olds say it is very important compared to 31% of Gen X’s (30-44 year olds) and 23% of baby boomers (55-65 year olds).
“It’s encouraging Australian consumers, especially the younger generation, view the credit reporting system as important – as this helps consumers better understand their financial position. The new comprehensive reporting system is designed to give lenders a more complete picture of a consumer’s debt situation, and consumers more control over their credit report,” ARCA CEO Damian Paull said.
According to ARCA’s research, one in four (25%) consumers feel stressed when it comes to managing credit and their own personal financial situation. When informed about what the changes will mean, just over half of consumers (53%) feel the new system will make things better for them, particularly those in the lower income bracket. Nine out of ten consumers believe having a good credit report is either very important (67%) or important (21%).
“Managing finances is not always easy and our research shows that managing credit can be quite a stressful ordeal for some. The new reporting environment offers a second chance for those ‘not so good payers’ who may have had a default in the past,” Mr Paull added.
Stringent rules in place to protect consumer privacy
Although the new system is viewed as positive overall, ARCA’s research shows consumers express some concerns regarding what type of personal information will be stored and how will it be used.
“Consumers are understandably concerned over how their personal information will be used and whether or not they will be targeted for marketing purposes. However, accessing the additional information supplied in credit reports for this purpose is strictly prohibited under the Privacy Act – and this will be closely monitored by the regulator. Hefty fines of up to $1.7 million will be imposed on any provider if they make such a breach,” said Mr Paull.
Last month, with the assistance of Australia’s largest financial institutions and credit reporting bodies, ARCA launched their consumer education website CreditSmart.org.au to help improve consumer understanding of the credit reporting changes.
“The launch of CreditSmart is an important step in improving consumer understanding of the move to comprehensive credit reporting. We want to empower Australian consumers to take control of their credit report to help take some of the stress out of managing their finances,” Mr Paull concluded.
