Credit active individuals will have yet another company to contact when obtaining their credit history, and it will be as important as ever for people to check their credit file regularly.

There is a new player in the credit reporting game, and it has some of Australia’s biggest lenders as its shareholders. Back in May, we blogged about the possibility of U.K. giant Experian entering Australian credit reporting, and speculated on what the issues may be for credit file holders in this country.

Today newly appointed ACCC Chairman, Rod Simms announced his approval of Experian’s entrance into the Australian market. The Sydney Morning Herald ran a story titled Experian is allowed to report for duty. The article says Experian will challenge the other two major credit reporting agencies, Veda Advantage and Dun & Bradstreet for Australia’s major credit reporter.

“The Australian Competition and Consumer Commission chairman yesterday decided there would be no substantial lessening of competition if Experian became the third sizeable in the Australian market – even if the big four banks and two other big US-backed lenders (Citigroup and GE Capital) are minority shareholders.

Veda and the Dun and Bradstreet group have been the big players until now, and the banks are among their largest customers. There was a fear that the banks now have a financial incentive to put all their business through Experian, or at least choke off the supply of customer credit information to service providers that will in future be competitors.

Sims and the ACCC accepted the banks’ argument that their backing of a new entrant to the market in Experian was in fact designed to increase competition by adding some pricing tension for services,” the article says.

So where do consumers stand amongst this change? According to the ACCC, they are in an improved state. They acknowledged Experian’s argument that the benefits to having a new credit reporting agency like Experian, is the greater competition for accuracy and efficiency that will result.

In addition to this, Australia’s move to new positive credit reporting laws will be enhanced by a company like Experian which is experienced in this type of data collection in the U.K.

But what about the accuracy of credit reporting – will this be enhanced?

Currently, there are several pieces of legislation, including the National Consumer Credit Protection Act and the Credit Reporting Code of Conduct 2009 which have gone a long way to improving the accuracy of credit reporting, by imposing tougher penalties for creditors who don’t comply with the Acts. The ACCC Chairman, in all likelihood probably found that legislation was strong enough to combat any conflict of interest that could have resulted from having the creditors also being minor shareholders in the credit reporting agency.

Whilst Experian will be bound to comply with this legislation as the other agencies are, the onus is on the consumer to check the accuracy of their credit report. This is where the system could fall down – through simple lack of public education. Yearly credit file checks are currently not in abundance for most credit active individuals. When disputing any adverse listing, it is up to the credit file holder to provide reason as to
why the creditor has not complied with legislation if they feel there are errors on their credit file.

Current statistics from Choice Magazine from 2004 point to up to 34% of credit files in Australia likely to contain errors.

What is concerning, is that many creditors are getting away
with not complying with Australia’s strict credit reporting legislation because consumers are simply not checking their credit file for errors. People are only finding out about any defaults, writs or judgments on their file when they apply for credit. This guarantees them an automatic decline with the bank and leaves them angry and stressed if they feel the listing should not be there.

If more was done to educate consumers as to their right to check their credit file for free every year, then people would have time to repair any errors when it is not urgent. It could also increase pressure for creditors to enhance the accuracy of credit reporting.

Is there a conflict of interest in terms of accuracy when many major Australian creditors will be small shareholders in the credit reporting agency? The ACCC found this was not the case.

Currently people can obtain a copy of their credit file for free every 12 months from one of the Australian credit reporting agencies, Veda Advantage, Dun & Bradstreet or Tasmanian Collection Services.

We recommend everyone should be concerned about the accuracy of their credit file. A yearly check should provide a picture as to its accuracy, and allow them the opportunity to redress any errors which present on their file prior to needing credit.

And for borrowers whose lender requires a credit check to
secure finance? We predict their application fee just got more expensive with the introduction of the new agency – potentially paying for three or four credit reports instead of two to three.