Lenders fail to share benefits
Borrowers are yet to see the benefits from the deeper intrusions into their privacy granted to lenders six years ago.
A report by the Office of the Privacy Commissioner on ‘‘comprehensive’’ credit reporting said there was little evidence the public was getting the ‘‘enhanced competition’’ and cheaper loans promised by lenders.
It was also believed that some borrowers who were being turned down for loans by the likes of banks would qualify under comprehensive credit reporting, and therefore not have to turn to high-interest, lower-tier lenders and loan sharks.
Credit agencies collect payments data on individuals from the likes of banks and power companies, allowing them to create credit files and credit scores. Lenders then access this data when considering applications.
From six years ago, the credit agencies were allowed to not only record ‘‘negative’’ data such as missed loan payments and defaults on people’s credit files, but also ‘‘positive’’ information such as timely payments.
Privacy Commissioner John Edwards said the privacy intrusions of comprehensive credit reporting were justified only if they benefited individuals and the wider economy. They were not there ‘‘simply to contribute to the profits of lenders’’.
‘‘We have not seen compelling evidence yet of the wider benefits that should flow from comprehensive credit reporting such as enhanced competition, risk-based credit offerings and a greater willingness of mainstream lenders to lend to previously underserved communities.’’
Edwards also criticised lenders for not using some of the consumer-friendly elements of the comprehensive lending regime, including one designed to make it easier for people to shop around for loans.
A ‘‘quotation inquiry’’ option had been created so that multiple credit checks logged when individuals looked for a good deal did not leave a black mark. But lenders were not using it.
Victims of identity theft were finding it difficult to get credit reporting agencies to clear their credit files.
The Privacy Commissioner has made 13 recommendations designed to ensure the public benefits of comprehensive credit reporting are delivered as the system matures.
Some of them could lead to changes to the binding Credit Reporting Privacy Code.