Stephen Jones (Whitlam, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

I am pleased to be speaking on this important piece of legislation, the National Consumer Credit Protection Amendment (Mandatory Credit Reporting and Other Measures) Bill 2019. It concerns mandatory credit-reporting arrangements. It is probably worth explaining a little bit how these arrangements work. For a bank or any financial organisation to pass personal financial information to a third party, they would need the permission of the owner or the party to whom the information relates. Otherwise, they would be in breach of the National Privacy Act and the National Privacy Provisions. However, Labor has always considered that there was a consumer benefit in having a national credit-reporting arrangement. We think it's pro-competition because it sets up a regime whereby we can have a standard and objective set of measures which enable a bank or another financial institution to assess the creditworthiness and the credit history of an applicant for a credit product. To enable such an arrangement to be put into place, clearly we needed to make some amendments to the national privacy legislation. Indeed, that's exactly what Labor did back in 2012. We put in place a comprehensive credit reporting regime by amending the Privacy Act to allow for credit providers to share repayment information with credit reporting agencies who can consolidate that information and then onsell it to lenders. We believe it's pro-competitive. It supports competition in the financial industry. It allows small banks and lenders who do not have access to the significant amounts of information and perhaps the market reach to get access to financial data, enabling them to make better lending decisions.

I make the point of identifying small banks and small financial institutions for this reason: most of the large banks have already got this information. If they've been dealing with a customer for many, many years and have access to multiple financial product information and the repayment history, they'll have that data. It's the small banks who won't have access to that data. Therefore, when they get an application from a consumer who wants to switch banks, it's that much harder for them to assess their credit history and therefore their creditworthiness.

Credit reporting also allows for increased price discrimination by lenders and may reduce the ability of people with bad credit histories to receive loans. The legislation before the House, in part, goes to this issue. Let me explain this: the current framework for the Privacy Act does not adequately support transparency of credit reporting information and does not currently support all of the passing on of information that we think is necessary.

One of the things that has been identified is what is described within the industry as a hardship flag. Let me explain how that works. Let's take a very probable set of circumstances that can occur at the moment, after the bushfires, the floods and even the hailstorms. Somebody has a credit arrangement with their bank. Their property has been burnt down and their business has been burnt down. They're going to have a period of time out of work or with disrupted income flows. The bank knows that. The banks, for the most part, have published nationally their willingness to enter into hardship arrangements, suspend repayments et cetera. That person goes to their bank and they say, 'Look, I need a holiday on my repayments because of this hardship.' A good banker, and most of them are, will agree and put in place an informal suspension of repayment requirements.

For the most part, in those sorts of hardship circumstances where it's a natural disaster or some other unforeseen event, it won't constitute a variation to the credit contract. The credit contract remains in place but there's an informal arrangement between the bank and the creditor. A hardship arrangement is flagged within the bank's system but is not passed on to the credit reporting agency as a hardship flag. What is passed on is that the repayment history has been interrupted. What the bank actually passes on to the national credit reporting agency is what is referred to as RHI, or repayment history information, that relates to each and every one of those individual customers. So, if we take the current bushfires as an example, when an informal arrangement is reached with your bank and you're not meeting your mortgage repayments, the bank will still pass on information to the national reporting agency, and that will affect your credit score.

This obviously has to be dealt with and, in the context of widespread disruption to economic activity visited upon businesses and households by the bushfires, this should be urgent business. We should be dealing with this. This should be urgent business to ensure that the initial hardship visited on somebody by the natural disaster is not compounded by the fact that they have a hard-to-repair interruption to their repayment history information. We want to have that fixed. We were actually concerned when this matter came before the last parliament that we needed to be cognisant of a review that was going on with the Attorney-General's Department so as to ensure the feedback through the Attorney-General's Department was reflected in the legislation. Our initial view is that most of that has. I will flag here that we won't be opposing the bill in the House—we support the general thrust of what is being proposed here—but it is almost certain that we will be moving some amendments in the other place.

Labor believes that there is a need to ensure that the current credit-reporting arrangements allow more-frequent and more-detailed access to information on behalf of consumers. We want to ensure that consumers are able to have access to information that relates to them. There are two reasons for that. It's their information, and there may be errors in the information or the need for them to repair some of that credit history information. Quite often when somebody is going to take out a new loan or apply for the refinancing of a loan the bank will have access to the information but the individual may not. We want to ensure they have that. Under current arrangements, the current framework within the Privacy Act, individuals are only allowed to access a free copy of their credit information once every year and in certain other specific circumstances. In addition, under the current arrangements reporting agencies have used loopholes within the Privacy Act to refrain from disclosing what is known as 'credit scores'—RHI credit scores. As a result, credit-reporting agencies have developed quite a profitable side business in the onselling of those credit scores—in fact, charging customers to access the individual's personal credit history. We think it's the individual's information and that they should have access to that and should have more timely access to that information.

The sorts of amendments that we will be proposing will allow individuals to access a copy of their credit information held by a credit-reporting agency free once every 10 days. They will require derived or generated credit scores to be disclosed to individuals as part of their rights of access to credit information. They will require the individuals to receive a statement summarising the key determinants of their credit score as part of their rights of access to credit information. They will allow the Australian Information Commissioner to create rules in relation to each of the above proposals. These are propositions that are strongly supported by consumer advocates. It is worth pointing out that similar provisions currently exist in New Zealand. We don't believe, on the information available to us, they will impose any significant new cost on the credit-reporting industry. They will, however, provide additional rights to consumers and additional competition benefits to the sector as a whole.

With these observations, I commend the bill to the House. I hope it has a swift passage here, and I look forward to progressing in the other place some of the issues that I've foreshadowed.

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