Examining key provisions that impact
hardship and the consequences of changes to
the credit reporting regime
Olga Ganopols...
Olga Ganopolsky – Financial Hardship Forum 19 March 2014
Not to be reproduced without the permission of the author 2
Key i...
Olga Ganopolsky – Financial Hardship Forum 19 March 2014
Not to be reproduced without the permission of the author 3
Hards...
Olga Ganopolsky – Financial Hardship Forum 19 March 2014
Not to be reproduced without the permission of the author 4
Hards...
Olga Ganopolsky – Financial Hardship Forum 19 March 2014
Not to be reproduced without the permission of the author 5
Priva...
What is Comprehensive Reporting in
consumer credit reporting?
6
• More information under tighter legal rules
• Use of comp...
Olga Ganopolsky – Financial Hardship Forum 19 March 2014
Not to be reproduced without the permission of the author 7
Impac...
Olga Ganopolsky – Financial Hardship Forum 19 March 2014
Not to be reproduced without the permission of the author 8
Views...
Summary and conclusions
Olga Ganopolsky – Financial Hardship Forum 19 March 2014
Not to be reproduced without the permission of the author 10
Summ...
Q&A
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Olga Ganopolsky, Veda - Examining key provisions that impact hardship and the unintended consequences of tightening credit and locking out borrowers

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Olga Ganopolsky, General Counsel, Veda delivered this presentation at the inaugural Financial Hardship Forum. The Forum convenes the banking and credit sector, plus regulatory, compliance and resolution agencies, to address changes in financial circumstances for consumers and businesses.

For more information, please visit http://www.informa.com.au/finhardship

Published in: Economy & Finance
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Olga Ganopolsky, Veda - Examining key provisions that impact hardship and the unintended consequences of tightening credit and locking out borrowers

  1. 1. Examining key provisions that impact hardship and the consequences of changes to the credit reporting regime Olga Ganopolsky General Counsel March 2014 The views expressed in this presentation are the views of the author and do not constitute legal or compliance advice. The presentation is incomplete without the discussion that accompanies it. Any reference to external documents does not constitute adoption of the whole external document.
  2. 2. Olga Ganopolsky – Financial Hardship Forum 19 March 2014 Not to be reproduced without the permission of the author 2 Key issues • Regulatory structure and complexity • Credit Reporting and Consumer Credit • Privacy rights and Consumer rights • On going review The Act The Regulations Registered Credit Reporting Code Regulatory Guidance
  3. 3. Olga Ganopolsky – Financial Hardship Forum 19 March 2014 Not to be reproduced without the permission of the author 3 Hardship – what is it • If a debtor considers that he or she is or will be unable to meet his or her obligations under a credit contract, the debtor may give the credit provider notice (a hardship notice), orally or in writing, of the debtor’s inability to meet the obligation FINANCIAL HARDSHIP VARIATION REQUESTS Contracts post 1 March 2013 Hardship request A borrower can provide a hardship notice by simply informing the credit provider of its inability to meet the obligations under the contract. Care – hardship notice can be provided orally! Grounds of change The changes that a credit provider and a borrower can agree to are not specified. Credit providers need to positively consider suitable changes to the contract that can assist the borrower. Credit providers should develop policies and guidelines listing acceptable changes. Information request If necessary, credit provider must request additional information to assess a hardship request.
  4. 4. Olga Ganopolsky – Financial Hardship Forum 19 March 2014 Not to be reproduced without the permission of the author 4 Hardship – what is it 1. There is no limitations on the types of hardship variations that can be requested. The amended section 72 does not specify the types of changes that can be made to a credit contract. 2. Hardship notices can be given orally or in writing. 3. The timing requirements and process for assessing a hardship application have changed. There is strict timelines for the credit provider: • requesting additional information from the borrower – must be done within 21 days of receiving the hardship notice • assessing the hardship application and responding to the borrower – if the borrower does not provide the additional information, then 28 days from the date the information was requested or if the borrower provides the additional information, then 21 days from the day of receiving the information. 4. Credit providers cannot commence enforcement proceedings until they have considered a borrower's hardship request. This hasn't been a big impact, as FOS and COSL required credit providers not only to stop enforcement proceedings while it considered a complaint but also, to stop enforcement proceedings as soon as it appeared that the borrower could be in hardship. 5. All credit contracts regulated by the NCC can request hardship
  5. 5. Olga Ganopolsky – Financial Hardship Forum 19 March 2014 Not to be reproduced without the permission of the author 5 Privacy Amendment (Enhancing Privacy Protection) Act 2012 Categories of regulation  Personal information held by Commonwealth Government Agencies and their contracted service providers  Regulated by the Australian Privacy Principles (APPs)  Personal information held by private sector organisation other than small businesses  Regulated by the Australian Privacy Principles (APPs)  Credit reporting information or credit eligibility information and information derived from that information held by credit reporting businesses or credit providers  Regulated by Part IIIA of the Act What is regulated? “Personal Information” personal information means information or an opinion about an identified individual, or an individual who is reasonably identifiable: a) whether the information or opinion is true or not; and b) whether the information or opinion is recorded in a material form or not.
  6. 6. What is Comprehensive Reporting in consumer credit reporting? 6 • More information under tighter legal rules • Use of comprehensive reporting information for direct marketing purposes is expressly prohibited • Pre-Screening is expressly permitted subject to restrictions as set out in the Act Negative Reporting Positive (or Comprehensive) Reporting • personal information – name, address, date of birth, employer, drivers licence • applications for credit made over the past five years (but not whether it was granted, or the type of credit, or the current credit limit) • defaults • court judgements over the past five years • bankruptcies (seven years) • ‘credit inquiries’ • what type of credit was offered • what the credit limit currently is • when the account was opened • when the account was closed • repayment history over the previous two years (only licensed Credit Providers) In addition to Negative Reporting information Olga Ganopolsky – Financial Hardship Forum 19 March 2014 Not to be reproduced without the permission of the author
  7. 7. Olga Ganopolsky – Financial Hardship Forum 19 March 2014 Not to be reproduced without the permission of the author 7 Impact on internal complaint handling and dispute resolution functions • Credit providers must: ― Be members of an External Dispute Resolution scheme ― Have processes that align with types of data in the system and corresponding compliance obligations ― Have the ability to resolve an individual’s complaint as the first point of contact ― Have a privacy policy in place that address these issues ― Have the ability to address increased accuracy obligations ― Have the ability to address file “freeze” request in events of identity fraud or takeover ― Be licenced under NCCP to access all data fields (i.e. repayment history obligations) and align this with other consumer protection measures in their respective lending environments (if they provide consumer credit) ― Have appropriate notices and consents • Address consumer credit reporting • Address commercial credit reporting
  8. 8. Olga Ganopolsky – Financial Hardship Forum 19 March 2014 Not to be reproduced without the permission of the author 8 Views on the data Predictive value (source; pilot data study)
  9. 9. Summary and conclusions
  10. 10. Olga Ganopolsky – Financial Hardship Forum 19 March 2014 Not to be reproduced without the permission of the author 10 Summary Issues Privacy Act 1988 Privacy Amendment (Enhancing Privacy Protection) Act 2012 Consumer credit reporting Negative Positive, 5 data fields - Credit risk - Risk of defaulting Personal information Regulated and defined by reference to information or opinion that can ‘reasonably’ identify an individual Potentially a broader definition Complexity Medium High Dispute Resolution Developed More detailed Access regime by individuals Developed Enhanced Prescriptive regime Highly prescriptive in consumer credit reporting Principles based for other personal information Highly prescriptive and higher regulation on use and disclosure in consumer credit reporting Regulatory Structure Office of the Information Commissioner (Privacy Commissioner) Office of the Information Commissioner (Privacy Commissioner) Penalty Intentional contravention punishable, on conviction by a fine (e.g. disclosure) Higher penalties for a greater set of conduct (e.g. collection). Civil penalties that can be as high as $1.7 million in total. Scope of Regime Consumer credit reporting Broader because it includes some data not previously regulated as consumer credit reporting under Part IIIA (e.g. publicly available information and de-identified information ) Alignment to other regimes such as responsible lending Not aligned (e.g. different definition of credit provider in different regimes) Some limited alignment (e.g. NCCP licensed providers have access to repayment history)
  11. 11. Q&A

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