Further to news on changes to Australia’s Privacy Laws, the Attorney-General Nicola Roxon announced that much awaited changes to the Privacy Act 1988 were introduced into Parliament yesterday. These changes will affect your credit file and how your good and bad credit history is shown.

By Graham Doessel, Founder and CEO of MyCRA Credit Rating Repairs and www.fixmybadcredit.com.au.

The Attorney-General said The Privacy Amendment (Enhancing Privacy Protection) Bill 2012 represents the most significant developments in privacy reform since Labor introduced the Privacy Act in 1988.

All of these changes have significant bearing on credit reporting accuracy in Australia, as an individual’s credit file contains so much personal information which is checked to assess risk when an individual applies for credit. It can also be subject to misuse and error.

The laws are promised to strengthen the power of the consumer over this important Privacy right.

“These new privacy laws focus on giving power back to consumers over how organisations use their personal information,” the Attorney-General said in a statement to the media yesterday.

This statement also addressed credit reporting specifically.

The Government has promised to ‘modernise’ credit reporting arrangements. The Attorney-General was more specific with some of the changes coming in with the introduction of comprehensive credit reporting as part of these Privacy Act 1988 reforms:

• making a clear obligation on organisations to substantiate, or show their evidence to justify, disputed credit listings
• making it easier for individuals to access and correct their credit reporting information
• prohibiting the collection of credit reporting information about children
• simplifying the complaints process by removing requirement to complain to the organisation first, complaints can be made directly to the Privacy Commissioner, and by introducing alternative dispute resolution to more efficiently deal with complaints.

The Government says it expects the credit industry will benefit because the reforms provide a more accurate picture of an individual’s credit situation to help them make a robust assessment of credit risk, which is expected to lead to lower credit default rates.

Namely, this refers to the controversial introduction of late payment notations on consumer credit files. Late payments will be added by licenced creditors even if a bill is one day late. The notation remains on the individual’s credit file for 2 years. It is unclear at this stage the exact process of law governing how late payments may be added to credit files, nor the precise way these late payments will be used when assessing risk and the potential impact on an individual’s ability to obtain credit.

I can’t help expecting some real confusion over this type of data to occur particularly in the early days whilst data has been collected without individuals knowing the potential impact on their credit file information, and generally arguments and confusion from consumers over what may constitute a bad credit risk after these laws are introduced.

Australian Broker published an article Credit Agencies rejoice as positive regime gets a kickstart, today in which Dun & Bradstreet’s Director of Consumer Services, Steve Brown said comprehensive credit reporting should open up credit for some groups of people.

“The use of comprehensive rather than just negative credit information provides greater visibility of under-served consumers who would otherwise find it difficult to access credit,” Mr Brown said.

This assumption would be due to people being able to now ‘counteract’ a late payment notation or potentially a default listing through their repayment performance history. This could mean that if people have a 5 or even 7 year listing on their credit file, they may be able to show that over a period of 2 years (the length of repayment performance history recorded) they have managed to pay their bills on time. It would then be up to the lender to assess whether they believe a consumer or business with a default who has paid their bills on time for the past 2 years is or isn’t a credit risk.

Whilst in theory this works, I am concerned this is very subjective and lenders could err on the side of caution especially initially.

At the moment I believe ‘repayment performance history’ only adds to the volume of negative data which will be visible on consumer credit files. I will be interested to see if in the coming years and months the advantage to this system does in fact materialise in the form of consumers with defaults being given a fairer go due to better repayment history before I am truly convinced.

Some significant submissions put forward to the Senate Finance and Public Administration Legislation Committee which were accepted by the Government and which should benefit consumers include:

• Streamlining the correction and complaints process for credit reporting
• During a correction complaint, the Creditor must give justification for credit listings and actually substantiate the information is reports on credit files.
• Consumers may complain directly to the appropriate Ombudsman rather than having to go through the organisation’s complaints process first.
• The provision for remedies such as compensation for consumers who are negatively impacted by a Creditor who has failed to comply with credit reporting law.

MyCRA will be very intent on seeing how the laws pan out for the actual application of these significant changes for consumers and their credit file information.

If people have bad credit history which they believe shouldn’t be there, or the data on their credit file is inconsistent – they can contact a professional credit rating repairer to get advice about formulating a credit listing complaint. Call MyCRA Credit Rating Repairs on 1300 667 218 or visit our website www.mycra.com.au.