From 1 July 2018, it will be mandatory for the big four banks to provide comprehensive credit reporting (CCR) data. CCR will remain optional for smaller banks and other lenders, as it has been since March 2014. Why are some of the big banks against CCR?
CCR from March 2014
CCR was first introduced in March 2014, but was optional for all lenders. Perhaps unsurprisingly, the voluntary element of CCR meant that very few lenders participated, and that only a very small amount of credit accounts were being reported. In April 2017, Equifax revealed that only 24% of lenders were in fact sharing CCR data. This number did not include any of Australia’s big four banks.
Consequently, on 2 November 2017, it was announced by the government that CCR would become mandatory for Australia’s big four banks.
What this means in practical terms for the banks is the following:
- From 1 July 2018, the big four will have to share 50% of your credit data with credit reporting bureaus.
- From 1 July 2019, the big four will have to share 100% of your credit data with credit reporting bureaus.
Draft legislation published by the government in February 2018 stated that banks will have 90 days from these dates to comply and share the data. In July 2018, the big four will be able to choose which data they provide to comply with the 50% requirement.
Although CCR is only becoming mandatory for the big banks from 1 July 2018, many smaller banks and other lenders already provide repayment history information. Those who aren’t already doing so are likely to voluntarily comply with CCR anyway in order to remain competitive in the finance marketplace.
Does the Lending Industry In General Support CCR?
Yes. Overall, lenders are positive about CCR, and understand the benefits it can bring themselves as well as to their customers.
Despite this generally positive outlook, some banks have concerns regarding CCR.
CCR May Prove Expensive and Complex
Australia currently uses a “negative reporting” credit system. This means that, along with personal information such as your name, current and previous addresses, and your employer’s details, only negative information is placed on your credit file, such as defaults, court judgment, and bankruptcies. As such, the big banks’ internal systems have been built to operate and be effective in this environment. For the big banks, CCR means expensive and complex updates to their systems and processes, so they can share data publicly with the credit reporting bureaus. Some of the big banks, including NAB, already shares data.
Big Banks are Worried CCR Will Impact Their Competitiveness
The big four banks consider the data they hold about their customers to be an asset. Under the current negative reporting regime, the banks have to share relatively little with credit reporting bureaus. This means that while any lender checking a credit application can see information regarding credit enquiries, defaults, and court judgments for the applicant, only the bank currently knows how reliable the person is when it comes to paying on time.
This puts the big banks in a position of power as they can curate deals and offers based on what they know about their customers’ behaviour and credit usage habits. The big four control 80% of the personal finance market, so it is in their interests to want to keep the information they will need to report under CCR to themselves. After all, with other lenders able to see that data, they may be able to offer their own unique products and deals and compete more closely with the big banks.
Where Does NOW FINANCE Stand on CCR?
At NOW FINANCE, we are in favour of CCR, and have already provided credit bureaus with two years of repayment history data for anyone with a NOW FINANCE personal loan account, and will be sharing comprehensive data.
NOW FINANCE already provides specific, tailored interest rates based on your credit history and behaviour. The mandatory implementation of CCR for the big four banks, and the likely voluntary implementation by many other lenders, will help us to continue to provide products and offers that are personal to you, and to improve how we do this.
Disclaimer: This article contains general comments and recommendations only. This article has been prepared without taking account of your objectives, financial situation or needs. Before taking any action you should consider the appropriateness of the comments made in the article, having regard to your objectives, financial situation and needs. If this article relates to the acquisition, or possible acquisition, of a particular credit product you should obtain and consider the relevant disclosure documents before applying for the product.