The adoption of the comprehensive credit reporting.
Damian Paull
Chief Executive Officer
www.arca.asn.au
Understanding the legislative jigsaw of the Australian Credit
Reporting System
Taking advantage of the new...
UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM
www.arca.asn.au
Owner Occupied Housing $886...
UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM
www.arca.asn.au
Investor Housing $427 Billi...
UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM
www.arca.asn.au
Other Personal Credit (Auto...
www.arca.asn.au
Credit reporting involves providing information about an individual’s
credit worthiness to banks, finance ...
Key Highlights
• Only 8% of customers disclosed their existing
debts fully.
• Undisclosed debts ranged from $3k to $120k.
...
Credit Reporting Framework
Privacy (Credit
Reporting)
Code
Obligations
sourced from
Privacy
legislation,
registered with
C...
UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM
www.arca.asn.au
Legislation
Privacy Act
Par...
UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM
www.arca.asn.au
Legislation
Privacy Act
Reg...
UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM
www.arca.asn.au
The Code sets out how certa...
UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM
Principles of
Reciprocity and
Data Exchange...
UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM
www.arca.asn.au
Principles of
Reciprocity a...
UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM
www.arca.asn.au
Industry
Standards
Technica...
www.arca.asn.au
The presence of a properly regulated comprehensive credit reporting
system;
• Assists lenders to identify ...
www.arca.asn.au
• Credit assessment
• Account management -
avoiding serious risk of
default
• Pre- screening
TAKING ADVANT...
www.arca.asn.au
Credit Limit + Repayment History
Higher Accuracy in Deducing Financial Status
More Informed Lending Decisi...
www.arca.asn.au
TAKING ADVANTAGE OF THE NEW DATA TO EMPOWER BETTER LENDING DECISIONS
A clearer picture: credit providers w...
TAKING ADVANTAGE OF THE NEW DATA TO EMPOWER BETTER LENDING DECISIONS
Taking Advantages of the new data to make better lend...
THE IMPORTANCE OF BUILDING CONSUMER AWARENESS
Taking Advantages of the new data to make better lending decisions?
www.arca...
THE IMPORTANCE OF BUILDING CONSUMER AWARENESS
Taking Advantages of the new data to make better lending decisions?
www.arca...
www.arca.asn.au
THE IMPORTANCE OF BUILDING CONSUMER AWARENESS
Damian Paull - Australian Retail Credit Association - A review of the process toward the adoption of comprehensive credit ...
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Damian Paull - Australian Retail Credit Association - A review of the process toward the adoption of comprehensive credit reporting and response from stakeholders

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Damian Paull delivered the presentation at 2014 Privacy Reform in Credit Reporting Forum.

From reviewing the journey toward day one compliance readiness to longer term transitional issues, the inaugural Privacy Reform in Credit Reporting Forum assessed all the critical factors industry professionals will want to know regarding the impact of privacy reform on credit reporting.

For more information about the event, please visit: http://www.informa.com.au/privacycredit14

Published in: Business, Economy & Finance
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Damian Paull - Australian Retail Credit Association - A review of the process toward the adoption of comprehensive credit reporting and response from stakeholders

  1. 1. The adoption of the comprehensive credit reporting. Damian Paull Chief Executive Officer
  2. 2. www.arca.asn.au Understanding the legislative jigsaw of the Australian Credit Reporting System Taking advantage of the new data to empower better lending decisions The importance of building consumer awareness. AGENDA
  3. 3. UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM www.arca.asn.au Owner Occupied Housing $886 Billion
  4. 4. UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM www.arca.asn.au Investor Housing $427 Billion
  5. 5. UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM www.arca.asn.au Other Personal Credit (Auto, Personal Loans, Credit Cards) $135 Billion
  6. 6. www.arca.asn.au Credit reporting involves providing information about an individual’s credit worthiness to banks, finance companies and other credit providers, such as retail businesses that issue credit cards or allow individuals to have goods or services on credit. ALRC report 108 “For Your Information’ UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM
  7. 7. Key Highlights • Only 8% of customers disclosed their existing debts fully. • Undisclosed debts ranged from $3k to $120k. • In >75% of cases, if debts had been fully disclosed it most likely would have changed the decision to lend. A major international FSP analysed a sample of bankrupt accounts to compare the debts disclosed at the time of approval against the debts at the time of bankruptcy... UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM
  8. 8. Credit Reporting Framework Privacy (Credit Reporting) Code Obligations sourced from Privacy legislation, registered with Commissioner Principles of Reciprocity and Data Exchange Obligations set by industry – eg. Reciprocity plus others (Refers to Industry and external standards) Compliance Monitoring External Standards eg. ASIC RG, ISO complaints- handling, IT standards Guidance (non-binding) Industry Standards Technical standards set by industry, for data quality, consistency, exchange Legislation Privacy Act and Regulations Competition and Consumer Act Part IV UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM
  9. 9. UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM www.arca.asn.au Legislation Privacy Act Part IIIA of the Privacy Act 1988 regulates the credit reporting system and follows the following key principles: • Transparency • Collection • Use and disclosure • Quality and Security • Access and Correction In recognizing the importance of consumer protection, the shift to more comprehensive credit reporting is accompanied by enhanced protection relating to; • notifications • direct marketing • identity theft - ban periods and • correction requests.
  10. 10. UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM www.arca.asn.au Legislation Privacy Act Regulations 2013 In relation to Credit Reporting and or the operation of Part IIIA, the regulations include: • The definition of various terms relevant to the credit reporting provisions in Part III A of the Privacy Act • Permitted disclosures of credit information to a credit reporting body (see s 21D of the Privacy Act • Transitional provisions excepting energy utilities, water utilities and commercial credit providers from the requirement to be a member of a recognised external dispute resolution scheme before disclosing credit information to a credit reporting body until 11 March 2015 (see s 21D(2)(a)(i) of the Privacy Act)
  11. 11. UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM www.arca.asn.au The Code sets out how certain provisions contained in the Act are to be applied and or complied with. The code deals wit the following matters: • Credit reporting system arrangements • Open and transparent management of credit reporting information • Information collection procedures • Credit information handling practices, procedures and systems • Consumer credit liability information • Information requests • Repayment history information • Default information • Payment information • Publicly available information • Serious credit infringements • Transfer of rights of credit provider • Permitted CRB disclosures • Security of credit reporting information • Use and disclosure of credit-related personal information by CPs and affected information recipients • Protections for victims of fraud • Use by a CRB of credit reporting information to facilitate a CP’s direct marketing • Access • Correction of information • Complaints • Record keeping • Credit reporting system integrity • Information Commissioner’s role Privacy (Credit Reporting) Code Obligations sourced from Privacy legislation, registered with Commissioner
  12. 12. UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM Principles of Reciprocity and Data Exchange Obligations set by industry – eg. Reciprocity plus others (Refers to Industry and external standards) Reciprocity is a key principle for credit data sharing. A creditor could accept sharing its information and break its information monopoly if it gains access to the information of other creditors and, thus, be able to perform a better credit risk assessment and thus use his resources more efficiently. The reciprocity principle is enforced in credit registers through provisions that ensure that access to credit data is granted only to those who contribute with their information.
  13. 13. UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM www.arca.asn.au Principles of Reciprocity and Data Exchange Obligations set by industry – eg. Reciprocity plus others (Refers to Industry and external standards) Principle 1 Bound to comply the PRDE. Principle 2 Access to CCLI and RHI - get what you give Principle 3 Service agreements acknowledge compliance with reciprocity and the ACRDS. Principle 4: Transitional rules support early adoption of partial and comprehensive reporting Principle 5: Monitoring, reporting and compliance requirements Principle 6: A broad review of the PRDE to be completed after three years.
  14. 14. UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM www.arca.asn.au Industry Standards Technical standards set by industry, for data quality, consistency, exchange 1. Supports the compliance requirements and responsibilities of the Privacy (credit reporting) Code, The PRDE and applicable legislation 2. Supports the completeness, accuracy and currency (up-to-date) of data to be held by a Credit Reporting Body 3. Caters for and is consistent with the common interests of all Signatories irrelevant of size or nature of Credit business (Banks, Finance companies, Credit Unions, Utilities, Telco’s, Debt Collection Agencies, ….) 4. The form and content of data exchanges should be aligned with Signatories operations 5. Must be Credit Reporting Body independent 6. Should minimise the IT development effort for Signatories to extract required data from their systems in support of principle 2 7. Should minimise the processing and operational effort for Signatories to supply data to Credit Reporting Businesses in support of principle 2 8. Should be consistent/aligned with any existing data standards commonly in use by the Credit Industry where appropriate 9. Should be aligned/adhere to industry standards where appropriate eg. Australia Post Address standard. • 15
  15. 15. www.arca.asn.au The presence of a properly regulated comprehensive credit reporting system; • Assists lenders to identify financial risks more accurately and potentially earlier • Improves economic performance of retail credit lending • Increases access to mainstream credit, eroding financial exclusion • Assist consumers to avoid over indebtedness and take greater personal control of their credit identity • Boosts productivity and consumer spending (World Bank and BIS) UNDERSTANDING THE LEGISLATIVE JIGSAW OF THE AUSTRALIAN CREDIT REPORTING SYSTEM
  16. 16. www.arca.asn.au • Credit assessment • Account management - avoiding serious risk of default • Pre- screening TAKING ADVANTAGE OF THE NEW DATA TO EMPOWER BETTER LENDING DECISIONS
  17. 17. www.arca.asn.au Credit Limit + Repayment History Higher Accuracy in Deducing Financial Status More Informed Lending Decisions Increase Competition for Credit Market Offer Differentiated Products to Individuals of Different Risk Profile TAKING ADVANTAGE OF THE NEW DATA TO EMPOWER BETTER LENDING DECISIONS
  18. 18. www.arca.asn.au TAKING ADVANTAGE OF THE NEW DATA TO EMPOWER BETTER LENDING DECISIONS A clearer picture: credit providers will have a more complete picture of your ability to repay debts. Better matching of credit to your needs: Credit providers can better match the terms and amount of credit. Fairer access to credit: Under the new system, there can be more information in credit reports to better help credit providers make a decision when consumers are applying for credit. Increased consumer protection: • Accessing Credit Reports • Corrections and Complaints • EDR • Ban Periods • Direct Marketing prohibition (new data) • New regulatory powers and penalties
  19. 19. TAKING ADVANTAGE OF THE NEW DATA TO EMPOWER BETTER LENDING DECISIONS Taking Advantages of the new data to make better lending decisions? www.arca.asn.au A Veda pilot study identified the following preliminary findings that indicate that Comprehensive Credit Reporting deliver significant benefits to:  Lenders, as it provides a broader view of their applicant and their overall risk (internal and external)  Lenders and Consumers, as this additional information provides a better view of the individual’s overall credit commitment and their ability to service credit debts and so supports responsible lending  The economy, as it has the potential to release the amount of credit extended to individuals while keeping the overall risk the same (or, alternately, lower the risk of the Lenders'’ credit portfolio)
  20. 20. THE IMPORTANCE OF BUILDING CONSUMER AWARENESS Taking Advantages of the new data to make better lending decisions? www.arca.asn.au As credit reporting is designed to affect individual behavior, without borrower knowledge of the consequences of the reform, the change in their behavior is likely to be more limited and the system will not fully capture the benefits of reform.
  21. 21. THE IMPORTANCE OF BUILDING CONSUMER AWARENESS Taking Advantages of the new data to make better lending decisions? www.arca.asn.au 41% - CONCEPTUALLY AWARE OF CREDIT REPORTING AT A BASIC LEVEL. MOST HAVE ENCOUNTERED IT WHEN APPLYING FOR CREDIT. GIVEN THERE IS LITTLE UNDERSTANDING, THERE IS CONFUSION AND CONCERN WITH ‘WHO CAN’ AND ‘HOW MUCH’ INFORMATION CAN BE ACCESSED THEREFORE, THERE IS A STRONG NEED TO EDUCATE AND PREPARE CONSUMERS FOR THE CHANGE THROUGH INFORMATION.
  22. 22. www.arca.asn.au THE IMPORTANCE OF BUILDING CONSUMER AWARENESS

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