ASIC’s recent credit card work and what it means for the evolution of responsible lending
Principles of Reciprocity & Data Exchange (PRDE)
WHAT ARE THE PRINCIPLES OF RECIPROCITY AND DATA EXCHANGE?
The Principles of Reciprocity and Data Exchange (PRDE) is a set of industry-developed data exchange rules to support the move of Australia’s credit reporting towards a comprehensive system. The PRDE facilitates sharing of credit reporting information among signatories by setting up a reciprocal data exchange.
The PRDE has been developed through extensive consultation over many years with ARCA Members and other key stakeholders. Based on this development process, ARCA considers the PRDE to be the most effective means to incentivise participation in the new credit reporting system and facilitate data sharing.
In 2014, Australia improved its system of credit reporting to make it more comprehensive. For decades, Australia had a system where only negative information could be shared by credit providers, like consumer defaults and bankruptcy reports. That system didn’t allow positive things to be shared, like the number and details of credit accounts that a consumer has or their track record of paying back credit.
The new laws mean that since 2014 negative information can continue being shared, but so too can positive information. Importantly, the new laws did not mandate the way that industry must share information, but have enabled industry to work together to develop a system of information sharing.
WHY IS DATA EXCHANGE GOING TO BE BETTER IN AUSTRALIA?
The PRDE has been developed to create an open and standardised system for the management, treatment and exchange of positive data. This is achieved through Reciprocity, Consistency and Enforceability.
The system ensures that a credit provider signatory only receives information that they supply into the PRDE data pool. The reciprocal model creates an incentive to share, because when a credit provider shares information, they receive the same equivalent high quality data in return.
The system creates a level of consistent data supply between Credit Providers and Credit Reporting Bodies. It provides a competitive and efficient system as Credit Providers contribute the same information to all Credit Reporting Bodies with which they have service agreements, and Credit Providers contribute all of the credit information across each of their consumer credit portfolios.
A compliance system gives signatories confidence in the elements of reciprocity and transparency that are central to the system.
WHAT ARE THE SIX PRINCIPLES THAT UNDERPIN THE PRDE?
Principle One enshrines that signatories commit to the binding and enforceable system and structures developed by industry that encourage the safe and secure exchange of credit information in the PRDE.
The obligations under this PRDE shall be binding and enforceable upon PRDE signatories. PRDE signatories agree to execute the Deed Poll to make this PRDE and the authority of the PRDE Administrator Entity (and through it, the Industry Determination Group and Eminent Person) effective and binding.
Principle Two ensures that the partial and comprehensive credit information is only exchanged between signatories to the PRDE.
It is necessary to be a PRDE signatory in order to exchange PRDE signatory Consumer Credit Liability Information (CCLI) and Repayment History Information (RHI) with other PRDE signatories.
Principle Three ensures that data meets a certain standard before it is exchanged, by requiring that shared data adheres to the Australian Credit Reporting Data Standard (ACRDS). The standardised system means that data is communicated in a way that it can be universally understood by other signatories to the PRDE.
Service agreements between PRDE signatories will require reciprocity and the use of the ACRDS.
Principle Four sets out a timeline for when signatories to the PRDE must transition their contribution of information into the PRDE. The timeline will ensure that there is a smooth transition to the PRDE.
PRDE signatories agree to adopt transition rules which will support early adoption of partial and comprehensive information exchange.
Principle Five outlines the dispute resolution and enforcement mechanisms of the PRDE system. The principle will ensure that there are comprehensive structures for compliance, monitoring, reporting and dispute resolution.
PRDE signatories will be subject to monitoring, reporting and compliance requirements, for the purpose of encouraging participation in the exchange of credit information and data integrity
Principle Six sets out the terms whereby the PRDE can be amended, and commits to a review of the PRDE three years after it commences.
A broad review of the PRDE to be completed after three years.
The PRDE is available here.
If you would like to learn more about the PRDE – including to discuss your training or other communications needs, contact ARCA's Administration & Membership Manager, Gill Moxham at firstname.lastname@example.org or 0400 993 276.