The sting is in detail

New rules will mean more details on our loans, writes

CONSUMERS are being warned to be extra careful to pay their debts on time under a new credit reporting regime starting soon.

Comprehensive credit reporting (CCR) is seen as largely positive for consumers because it rewards good repayment behaviour and can deliver borrowers cheaper interest rates, but it also captures extra negative activities such as late payments.

Australians’ credit files currently show applications, bankruptcies and defaults – which are debts 90-120 days overdue.

Soon they will track credit card, home loan, personal loan and overdraft repayments and inform potential lenders of any missed payments.

CCR has been voluntary for four years, but a slow take-up by banks prompted the Federal Government to make it mandatory for major banks to supply the extra information to credit agencies from July 1.

MoneyPlace chief executive Stuart Stoyan said CCR was largely positive, and would bring Australia into line with the rest of the world, but it was vital to maintain good repayment habits.

“It is now really important with comprehensive credit reporting that you do pay your bills and make all repayments when they are due,” he said.

“Missing those repayments will potentially prevent you from getting any future loans you are looking for.

“This is not just about lenders making sure you are going to repay. It’s about enabling responsible lending so people who can’t afford a loan don’t get given a loan.”

Fintech companies such as MoneyPlace and RateSetter and lenders NAB and HSBC already have CCR in place.

Financia managing director Angelo Benedetti said the new rules would force borrowers to be more accountable.

“It’s going to be very hard for a bank to approve a loan if people don’t come up with clear credit,” he said.

“In preparation for this, a lot of banks are already wanting to see statements for the past three months. They’re getting ready to make sure they can prove those clients are a good risk.”

Mr Benedetti said expanding CCR to include missed payments on utility and phone bills would probably happen “down the track”.

But he warned that telecommunications companies were already the number one culprits for slapping defaults on consumers who had made honest mistakes.

“Most of the time they’re not justified,” he said.

Late last month the Federal Government introduced legislation to parliament to enact mandatory comprehensive credit reporting for major banks.

Treasurer Scott Morrison said the new rules would give lenders access to a richer set of data to encourage them to compete for customers with positive credit histories.

“Lenders have had the ability to share comprehensive credit information on a voluntary basis since 2014, but have failed to do so,” he said.