black mark credit reporting rulesAs consumer advocates interested in accurate credit reporting, rarely would we consider the press to have a great grasp of credit reporting and the issues consumers face, and even less so with the wider coverage of comprehensive credit reporting that has occurred to date. It’s not their fault really – but their views and ideas about fairness, and which are frequently conveyed to the general public are often shaped by players who have had a vested interest in this legislation. Sometimes what we read is not the whole picture of what’s really going on. That’s why it was refreshing to recently read columnist Jenna Price’s piece for the Canberra Times, titled Big black mark for new credit reporting rules. I have included it in this post in its entirety.

By Graham Doessel, Non-Legal Director of MyCRA Lawyers

Big black mark for new credit reporting rules.

By Jenna Price. Canberra Times.

Hey. Your last credit card bill. Do you remember when you paid it? Did you check the date it was due? Or did you just pay it when you had the spare cash?

And the one before that, say, the one that was due in December when you were busy spending and not paying bills?

Okay, final question. What about the credit card bill you received in January last year. You know you were busy trying to reshuffle your finances after the mayhem of Christmas and New Year – but did you pay that bill on time?

I only ask because from next month any time you are five days late on a bill from a licensed credit provider, that late payment will go as a little mark into your credit history file. A little black mark.

Every. Single. Time.

This new legislation sits in the Privacy Act (loosely named, really, since we don’t have any). From March there will be extensive changes to the credit reporting rules in that act and there will also be an accompanying code of practice, drawn up by the Australian Retail Credit Association.

The association drafted the code but it will not be responsible for it. That’s the job of the regulator, the Office of the Australian Information Commissioner. Of course, both bodies called for submissions and consultations. And, of course, they ignored the majority of the input of consumer advocates with decades of experience.

Credit card payments. Mortgage payments. Car loans. Personal loans. If you have a loan from a bank or mutual bank – or any other providers licensed to give you money – and you are just five days late, it will go straight to your repayment history. That history will be available for any lender to check out if you ever need money again.

These dramatic changes are taking place and no one is telling us about them. There are no advertising campaigns. There is no education process. Just a daggy little website called Credit Smart run by ARCA, the peak body for those same lenders that will be running surveillance on your records. The animations. The script. Cringeworthy.

When did ARCA launch the website? The press release says late January.

What’s worse is that the scheme is retrospective. So it’s not as if you can decide to be meticulous from this very moment. Nope. From December 2012, if you were late it can be uploaded to your file.

Nor do the banks or mutuals have to make a song and dance about it. Nope. They can just send you one of those bland terms and conditions emails or letters and you will not even recognise that you are about to be watched with an auditor’s eye.

The way it’s been promoted by some is that this will mean those of us who pay on time will be able to get discounts.

But Kat Lane, the experienced consumer credit advocate at the Consumer Credit Legal Centre NSW, said that overseas experience reveals punctual payers may not get benefits. Instead, the information will be used to target those who pay late. You can imagine, can’t you? There are lenders who will go after vulnerable consumers and charge them accordingly.

Lane said consumers would certainly be able to use external dispute resolution if they want to challenge what is held on their files – but that may take months. The Financial Services Ombudsman is already a very busy agency.

The fact is, this is all about the convenience and protection of lenders and not about the safety and security of consumers.

Last year, the Australian Retail Credit Association conducted a survey on what Australians thought about credit reporting. Not much – in fact 60 per cent of us had no idea what that term meant. And those of us who did know something, thought of credit reporting as negative.

Damian Paull is CEO of ARCA, which is charged with educating people on these changes. I asked him if he’d ever paid a bill late.

He said: “I’m far more conscious now of tracking when my bills are due … my behaviour has changed and my consciousness has changed since I’ve become more aware.”

Which is lucky for him, with plenty of notice and a wealth of understanding from years in the industry.

The rest of us aren’t so lucky. And it won’t be long before utilities bills join home loans and credit card payments. I fear it will be telco bills. Telcos argued hard for repayment history.

And I predict our – so far – safe and successful lending system will be riddled with the damage done to people persecuted by lenders with no hearts and no discernment, just their little black credit records.

Bravo Ms Price, finally someone has seen these changes for what they really are…the certainty of MORE NEGATIVE for consumers, with a very vague promise of positives. And like Ms Price I agree that there has not been enough done to educate consumers about these changes before they were implemented. I too imagine a day when telcos and energy companies are able to report repayment history information and cringe at the ramifications this could bring to consumers.

While the new Privacy amendments as a whole have some merits for consumers, I would consider it is not the fool-proof system that consumers are being led to believe – particularly in their application.

Being involved in many credit dispute cases on behalf of consumers in the past has meant we have seen first-hand what consumers should be worried about within the framework of credit reporting.

Credit providers make mistakes, and in other cases they try to ‘get away’ with not doing what they should be doing to protect consumer rights. This can affect thousands of consumers.

And as mentioned by Kat Lane in the above article, it can take months to challenge a listing via an EDR scheme like an Ombudsman Service. In some cases in the past we have also found that Ombudsmen haven’t investigated cases fully for the consumer – due to points of law being out of their scope of investigation. We have found this can be detrimental to successful dispute resolution.

In the area of correction, consumers are being told if they have a problem with a credit listing, they can fix it themselves. This is across the board on many websites – including the Office of the Australian Information Commissioner and ARCA. Consumers have been urged to “watch out for” credit repair companies, and told if there are errors on their credit file, they don’t have to pay anyone to fix them.

In my opinion it is dangerous to tell consumers with little to no knowledge of Privacy legislation that the only way to dispute their credit listing is through the internal systems. Certainly, we would not deter anyone from fixing their own credit listing if they chose to do so – indeed, it would be preferable for them to try it themselves rather than engage with a ‘dodgy’ company performing credit repair.

On the other hand, consumers should not be entirely discouraged from seeking advice on their own behalf in a dispute matter which results in them engaging with a reputable credit repairer or a good lawyer well-versed in credit law. We liken it in some ways to doing your tax returns. You can do your own – certainly yes. But you can also pay your accountant to complete it for you. Both are valid options. The difference is – the ATO is not telling consumers they can’t use an accountant to complete their tax return.

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