Daniel Paperny for Fintech Australia
The federal government will proceed to mandate comprehensive credit reporting (CCR) from Australia’s largest credit institutions in what has been hailed as a positive step among fintech industry leaders.
In his address at FinTech Australia’s intersekt festival this morning, Federal Treasurer Scott Morrison announced Australia’s major banks and credit institutions will be required to collect and make available the positive credit history of customers.
Morrison said that currently just 1 per cent of comprehensive credit reporting data was being shared publicly but, effective from 1 July next year, Australia’s Big Four banks will be required to have 50 per cent of their credit data ready for reporting. This will increase to 100 per cent in 2019, the Treasurer added.
“The regime will give lenders greater transparency on a borrower’s true credit position and their ability to pay a loan,” Morrison said.
“This reduces a lender’s exposure to defaults by allowing it to calibrate its lending according to risk [and] this new transparency will also open up the lending market to new players by enabling them to better assess the credit risk of customers.”
FinTech Australia vice chair and founder of marketplace lender MoneyPlace Stuart Stoyan said the announcement was “especially exciting” as it ultimately meant Australians would be able to access better lending rates.
He welcomed the news that it would also include a consultation process and potential expansion to include gas, electricity and phone service providers.
“At the moment, we have a system that largely revolves around negative information such as whether or not an individual has defaulted, so what the positive information of CCR enables you to do is look at things like repayment history and balances,” Stoyan said.
“You are then able to better assess credit and provide Australians with a better loan at a fairer interest rate instead of otherwise being penalised as we currently are.”
RateSetter Australia chief executive Daniel Foggo welcomed the Treasurer’s announcement, saying this was an “outstanding result” for Australian consumers and small businesses.
He said that whilst the Government would only make it mandatory for the big banks to participate, other large lenders would quickly follow, ensuring the full benefits of improved data availability will be quickly realised.
Foggo affirmed that the Government had learnt from overseas experience showing that better data availability leads to greater competition between lenders.
He said this would help ensure greater availability of credit to consumers and small businesses, whilst also lowering average borrowing rates and assisting those consumers who are often marginalised in our current reporting regime.
Stoyan noted it was concerning that Australia’s banks and major lenders had not shown a genuine intent to commit to a comprehensive credit reporting regime in the past.
“What we now have is a clear mandated timeframe for this to be accomplished and it is great that the Treasurer’s going to hold the industry accountable,” he said.
“Banks have been working on CCR for almost a decade in Australia. It is deplorable that it has taken this long, so let’s get on with it and ultimately create a better environment for Australian borrowers.”
Press announcement can be found here
Daniel Paperny was formerly a senior journalist for trade publication Financial Observer and now works as an Account Manager for Media & Capital Partners.