“For those people doing it tough – one of the most important things they need is to be able to open a dialogue with their bank and make moves to guard their asset and their credit file during periods of financial difficulty, and this will be formalised under the new financial hardship laws,” Mr Doessel says.
But he says for credit impaired individuals, we are yet to see the full extent of any ‘fairness’ until the implementation of amendments to the Privacy Act 1988 occur in 2014.
“Whilst there are many aspects to this credit reform which will be helpful to those disadvantaged Australians, such as hardship provisions and capping pay-day loans, the most significant change for people forced ‘on the fringe’ will be within the area of correcting credit reporting mistakes, which won’t be implemented until March 2014,” he says.
The Privacy Amendment (Enhancing Privacy Protection) Bill 2012 will change the Privacy Act 1988 in the area of correction of credit reporting inconsistencies, including enabling consumers to force their Creditor to justify a disputed listing; and give consequences for credit reporting breaches.
Next month’s implementation of the National Consumer Credit Protection Amendment (Enhancements) Act 2012 will also bring reforms to a range of credit areas, with the sole regulator being Australian Securities and Investment Commission (ASIC).
A range of credit reforms will include;
* Changes to procedures for hardship applications under the National Credit Code.
* A ban on short-term credit contracts (that is not a continuing credit contract; where the credit provider is not an authorised deposit-taking institution (ADI); the credit limit of the contract is $2,000 or less; and the credit contract is for a maximum term of 15 days or less).
* New obligations for small amount credit contracts (that is not a continuing credit contract; where the credit provider is not an ADI; the credit limit of the contract is $2,000 or less; and the credit contract is for a maximum term of 1 year) including:
* introducing presumptions of unsuitability where a consumer is in default of an existing small amount credit contract; or in the preceding 90 days, a consumer has been a debtor under two or more other small amount credit contracts
* Specific protections for reverse mortgages – such as the requirement to provide consumers with projections of the debtor’s equity in the property under a reverse mortgage and a reverse mortgage information statement.
* Remedies for unfair or dishonest conduct by credit service providers.[ii]
Mr Doessel says whilst the new obligations for Creditors will have significant advantages, they are only part of the credit reform ‘puzzle’. He says credit reporting mistakes still occur frequently, and individuals can be disadvantaged and refused mainstream credit by a system that has failed them.
“People with defaults on their credit file can be severely disadvantaged – locked out of mainstream credit for 5 years. Not all defaults deserve to be there. People are getting let down by the system and have equal trouble correcting their credit reporting mistakes.”
“Whilst the powers that be say that there is a legitimate avenue for correcting credit reporting mistakes for the individual, many consumers who have dealt with big companies for even small complaints issues will attest to the difficulty in getting a straight answer, getting someone who knows what they’re talking about first time, and ultimately correcting the mistake,” he says.
He is hopeful that a large piece of the puzzle for those suffering hardship unfairly will be completed once the Privacy Act 1988 amendments come into effect in March 2014.
“It remains to be seen next year how changes in credit reporting law will allow credit impaired individuals to be able to address inconsistencies on their credit report which can see them disadvantaged and funnelled into expensive credit such as payday loans,” Mr Doessel says.
He hopes Privacy Act amendments will see fewer of those consumers locked out of mainstream credit unnecessarily – but he says it is a matter of seeing how the laws pan out.
“My concern is, how ‘late payment notations’ (which are being recorded now as part of the Privacy Act changes) will impact credit suitability and I would hope repayment history information will not undo credit approval if the debtor has managed to avoid a default and negotiate a variation of repayment terms because of temporary hardship under these new laws,” he says.
“So there is still going to be a time of uncertainty for many involved in credit, including for consumers. I know the intention is that eventually, we will see a better and fairer credit system for all – but I think the road to it could be a rocky one,” he says.
Graham Doessel – CEO Ph 3124 7133
Lisa Brewster – Media Relations firstname.lastname@example.org
http://www.mycra.com.au/ 246 Stafford Road, STAFFORD QLD. Ph: 07 3124 7133
MyCRA Credit Repair is Australia’s number one in credit rating repairs. We permanently remove defaults from credit files.
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