- The Morrison Government has officially passed changes to the Mandatory Comprehensive Credit Reporting (CCR) regime this week
- The laws are designed to drive competition in the lending market while preserving and enhancing consumer securities and protections
- However, the proposed new rules would require financial hardship information to be displayed on a consumer’s credit report — regardless of how much time was actually spent in hardship
- This has brought criticism from consumer groups, who say the news laws may put people off seeking financial assistance when they need it most
- Nevertheless, Treasurer Josh Frydenberg maintains the changes encourage responsible borrowing
- The amended lending laws come as consumer groups rally against proposed changes to responsible lending laws that would allegedly favour banks and lenders over consumers
- The laws passed this week are not the same as the proposed changed to responsible lending laws
The Morrison Government has officially passed changes to the Mandatory Comprehensive Credit Reporting (CCR) regime this week.
According to the government, the laws will drive competition in the lending market while preserving and enhancing consumer securities and protections. Treasurer Josh Frydenberg said the laws are essentially designed to deliver benefits to both lenders and borrowers.
“Australia’s largest banks will now be required to participate fully in the credit reporting system in order to provide more Australians with better access to credit,” the Treasurer said.
“With a deeper, richer set of credit data, consumers will be able to demonstrate their credit worthiness and seek a better deal, while lenders will have greater opportunity to compete for customers with positive credit histories.”
The bill has met some criticism from consumer groups who argue that the news rules might cause people to shy away from seeking assistance from their lenders when they need it most.
Finance Rights Legal Centre: New rules are “invasive”
The concerns come from new regulation for consumers experiencing temporary financial hardship.
The new laws would have financial hardship information displayed on a consumer’s credit report for up to 12 months, no matter how much time was actually spent in hardship.
Finance Rights Legal Centre CEO Karen Cox said until now, seeking a repayment arrangement from a lender has been a private matter between banks and their customers.
“Financial Rights is very concerned that people will shy away from seeking assistance from their lenders, when people become aware of these changes,” Karen said.
“Financial Rights has spoken with countless people who would rather continue to struggle with unsustainable payments or look for dangerous quick-fix solutions such as payday loans or expensive refinancing, rather than risk having what they perceive as negative information listed on their credit reports,” she said.
She said this issue is particularly pertinent in light of COVID-19 financial woes, which have seen over 900,000 Australians take hardship deferrals.
Nevertheless, the Federal Government maintains that the new laws encourage responsible borrowing as lenders only have access to this hardship information if consumers are seeking access to new credit or if the consumer agrees to the information being provided.
“The scheme also offers consumers greater financial transparency and protections, following additional amendments made by the Government,” Treasurer Frydenberg said.
“Consumers will be able to access their credit files for free every three months. Credit reporting bodies will also be mandated to share a consumer’s credit score range, and an explanation of the input information that determines the credit score,” he said.
The amended lending laws come as consumer groups rally against proposed changes to responsible lending laws that would allegedly favour banks and lenders over consumers.
A group of nine organisations urged the government this week to scrap the laws, saying they set Australia up for a “household debt disaster”.
The laws passed this week are not the same laws as the proposed amendments to consumer lending rules.