Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Financial Services) Share this | Hansard source

The continuing flow of credit is the lifeblood of the Australian economy, and this must be effectively balanced by the need for free-flowing credit along with responsible protections for customers and their personal data. Since Labor's 2012 reforms to the credit reporting system, we've encouraged competition in the credit lending marketplace. This system allows smaller banks and lenders who do not have access to significant amounts of financial data themselves to make better lending decisions.

This bill legislates the requirement for major banks and credit providers to provide detailed credit information to credit reporting bodies, with the aim of enabling credit providers to better meet responsible lending obligations. At the same time, it provides protections for consumers to ensure that the supply of that credit information can't be abused by unscrupulous operators within the sector.

Schedule 1 of the bill requires major banks to provide detailed credit information to credit reporting agencies from 1 April 2020. This element of the bill will have no immediate effect. All eligible major banks already supply this detailed credit information to credit reporting agencies, so it is basically legislating something that already occurs within this industry. But, admittedly, it is a reform that the banks have only taken on in recent years.

Schedule 2 sets out new standards for how people in financial hardship should be treated by credit reporting agencies. The new standards will create two hardship flags that are placed into credit reports for individuals. The hardship flags will set out whether an individual has a permanent variation or a temporary variation to their credit obligations.

The changes in this legislation bring it into line with current industry best practice and will allow for customers to better demonstrate their credit worthiness. This change will also generate more transparency and accountability and competition in the credit market. The bill also establishes new standards, as I mentioned earlier, for people who are experiencing financial hardship. These two financial hardship flags can be placed into credit reports for individuals. Those hardship indications will better distinguish between customers experiencing long-term hardship and a permanent variation to their credit obligations and customers experiencing a temporary variation to their credit obligations. This allows customers more freedom to access hardship provisions without undue fear of negatively affecting their credit rating into the future.

These protections are important. We have all seen how, in other jurisdictions, credit ratings can be used against customers—in particular, vulnerable customers—to deny them credit in situations where they otherwise would not be affected. By allowing customers greater access to nuanced hardship provisions, the bill seeks to ensure the continued flow of credit in our economy and to allow customers to access legitimate hardship provisions before their financial situation deteriorates beyond repair.

Further amendments could be made to reduce the length of time for these hardship provisions and how much information is stored by credit reporting bodies once the hardship provisions have ended. We know that people go through situations in life where they experience hardship in terms of their financial position, but they get out of it. They work their way through it. That financial hardship doesn't last forever. Similarly, when people access these nuanced provisions and are taken by the hardship flags, once they are out of that situation that particular classification shouldn't last forever on their credit file. Perhaps that's something the government should consider further into the future. This will further remove barriers for customers to access hardship provisions, which will be better for both credit providers and customers, allowing credit providers to receive the money they're rightfully owed and ensuring customers can continue to make repayments within their means.

The banking royal commission has demonstrated that customers need more protection and freedom, and under this bill customers will continue to be eligible to only one copy of their credit information each year. This puts customers at a disadvantage when making financial decisions and shopping for the most competitive credit. Individuals should be able to access their own credit information significantly more often. They should also be entitled to know how this credit information is calculated and what the key determinants of their scores are. In the credit market, information is powerful. It's time that we levelled the playing field and gave customers access to their own information about their own credit scores. The credit-reporting system should be as transparent as possible so that people can access, understand and seek corrections to their credit-reporting history.

The Information Commissioner should be given the liability to protect sensitive personal data, as customers have seen too often in recent years that large financial institutions we trust with our personal data have been unable or unwilling to adequately protect some of that data. Effective oversight of personal information available in the credit-reporting marketplace is central to ensuring public trust of credit reporting systems. This bill reflects many of those concerns which we've heard from the industry, customers and the Office of the Australian Information Commissioner by allowing credit providers to withhold personal credit information if they reasonably believe that the credit-reporting body is not complying with the data security requirements of the Privacy Act. That's an important reform as well.

The bill in its current reform goes some way to bringing the legislation in line with current industry practice, but the government should consider further reforms in ensuring protections for customers seeking credit and information on their personal data in a regular and timely fashion. Nonetheless, this bill is an improvement and a codification of the way the industry works at the moment. On that basis, Labor will be supporting the bill and its passage.

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