MyCRA Specialist Credit Repair Lawyers

Tag: repayment performance history

  • Credit reporting changes introduced into Parliament

    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.

  • New credit reporting laws could see millions of people refused home loans

    The Federal Government is preparing to roll out its new credit reporting laws.

    Its comprehensive credit reporting system will allow lenders more access to a potential borrower’s credit information – but the move to positive credit reporting could disadvantage millions through allowing late payments to be noted on Australian credit files.

    This new aspect to credit reporting virtually ensures there is no room for error with consumers or creditors when it comes to loan repayments or people may face a bad credit rating.

    The Government proposes to bring in  ‘repayment performance history’ to credit files – which among other things will allow for credit providers bound by the National Consumer Credit Protection Act to make late payment entries on a person’s credit file if payments are late even as little as one day.

    In these harsh economic times, the ‘noting’ of late payments on a person’s credit file will most definitely impact on the consumer’s ability to obtain finance.
    Lenders are sure to see late payments as a potential credit risk. If the late payment of a few days is due to delays in bank processing of transfers or direct debits, paying at Australia Post, BPay etc. – these things are beyond the control of the average consumer yet that is exactly who will get hurt.

    Under current credit reporting legislation, late payments are not noted on a person’s credit file until they pass to the ‘default’ stage – which is more than 60 days in arrears. The creditor is also bound to fulfil a series of requirements to give the consumer the opportunity to rectify the situation before listing the default. This legislation will remain, but the ‘repayment performance history’ will also be added. The potential for error in this instance is high.

    There are more than 14 million credit files in Australia (14.7 million files are held by credit reporting agency, Veda Advantage alone), and approximately 3.47 million negative listings (Veda Advantage, 2009), but the number of possible errors which exist is not certain.

    The possible volume of credit files with errors was revealed by a small scale study conducted in 2004 by the Australian Consumer Association (now Choice Magazine), revealing about 30% of credit files were likely to contain errors.

    “In our view, there are serious, systematic flaws which are leaving an increasing number of Australian consumers vulnerable to defamation, mis-matching and harassment,” the ACA report said.

    Transferring those figures from the Choice study to the number of credit files in Australia today, could mean potentially 4 million errors currently exist on credit files in Australia.

    Recently Channel 7’s Today Tonight interviewed Veda Advantage’s Head of External Relations, Chris Gration on the possible number of errors on credit reports. He admitted errors within their system alone amounted to 1%.

    “We give out about 250,000 credit reports to consumers every year. But only in 1 per cent of cases is there a material error on the file, so a default or an enquiry that’s incorrect,” Mr Gration told Today Tonight.

    Even if as little as 1 per cent of those 14 million credit files contained errors, that would still currently leave 140,000 credit files in Australia containing errors that just shouldn’t be there.

    Under current credit reporting legislation, it is up to the consumer to check for errors. Credit file holders are able to obtain a copy of their credit report from one or more of Australia’s credit reporting agencies for free every 12 months.

    But the problem is, consumers are often not aware across the board of their responsibility to check the accuracy of their own credit file, so many errors go undetected.

    Often it is not until people apply for a home loan that they learn they have a bad credit rating, but by then it is too late and they are generally refused credit or forced to take on non-conforming loans at sky-high interest rates to secure the home.

    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. Unfortunately many people find this process difficult – negotiating with creditors is not always easy for the individual to undertake.

    The job of credit repairers is to check the process of listing defaults for legislative and or compliance errors, any such errors could deem the credit file default listing unlawful, at which time the creditor is advised to remove the default.

    Given the difficult process of default removal, it is worrying for consumers that getting ‘late payment’ errors removed from credit files may be just as problematic.

    If people want to obtain more information on removing errors from credit files, they can contact MyCRA Credit Repairs tollfree on 1300 667 218 or visit the main website www.mycra.com.au.