New invasive credit reporting rules will hit consumers while safe lending protections under threat.
Consumers will have private financial hardship information exposed on their credit reports for the first time as a result of the passing yesterday of the National Consumer Credit Protection Amendment (Mandatory Credit Reporting and Other Measures) Bill 2019.
It comes as the Government has introduced a bill to repeal the very same safe lending protections it used to justify exposing financial hardship information in the first place.
Seeking a repayment arrangement from your lender because of a temporary set-back has until now been a matter between banks and their customers.
Financial Rights Legal Centre Chief Executive Officer Karen Cox said the passing of this bill means that financial hardship information will be retained on a person’s credit report for twelve months or more, even if an individual is only in hardship for a very short time.
Financial Rights is very concerned that people will shy away from seeking assistance from their lenders, when people become aware of these changes,” Ms Cox said.
Financial Rights has spoken with countless people who would rather continue to struggle with unsustainable payments or look for dangerous quick-fix solutions such as payday loans or expensive refinancing, rather than risk having what they perceive as negative information listed on their credit reports.
There have already been reports in the media of people ghosting their lenders as COVID-19 support ends. This change is likely to make the problem worse.”
The Australian Government has justified the inclusion of financial hardship on credit reports because it supports better responsible lending.
Permitting financial hardship information to be viewed together with repayment history information on credit reports can potentially assist credit providers to better meet their responsible lending obligations and properly assess the suitability of a credit product for a particular borrower,” Ms Cox said.
But in the absence of safe lending laws, there is a danger that this information may be used by unscrupulous lenders to target people in financial stress for more expensive, riskier products.
This puts individuals and families at risk during a period of unprecedented financial hardship.”
Ms Cox said while some last minute amendments to the Bill would be beneficial to consumers, including access to a free credit report every three months, and free access to credit scores, the requirement to list financial hardship information on credit reports would lead to fewer people in serious financial hardship reaching out to their credit providers for assistance.
If the responsible lending laws are also taken away, some of these people will inevitably become targets for predatory lenders offering a quick short term fix that will only make the situation worse,” she said.
These changes take on a particularly perverse light after we just saw over 900,000 Australians take hardship deferrals during the COVID-19 crisis.
Had this Bill passed in 2019 all of those people would now be branded with ‘hardship’ for upwards of 18 months or more,” Ms Cox said.
Their ability to get credit in the future could be severely affected, making recovery from a disaster even more difficult.”
Now that these credit reporting changes have gone through, it is even more critical that safe lending laws remain in place.”
About Financial Rights
The Financial Rights Legal Centre is a community legal centre that specialises in helping consumers understand and enforce their financial rights with consumer financial products and services, especially low income and otherwise marginalised or vulnerable consumers. We provide free and independent financial counselling, legal advice and representation to individuals through our following channels:
- Credit and Debt Legal advice line 1800 844 949 for those needing legal advice in NSW;
- National Debt Helpline 1800 007 007 – for people needing to talk to a financial counsellor (please note this line is answered by a number of different services around Australia, Financial Rights is one of those services);
- Financial Rights Legal Centre – financialrights.org.au;
- Mob Strong Debt Help 1800 808 488 – our national service for Aboriginal and Torres Strait Islander callers financialrights.org.au/mob-strong-debt-help;
Insurance Law Service 1300 663 464 – our national service focusing on problems with insurance or debts to insurers