Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Link to this | Hansard source

The National Consumer Credit Protection Amendment (Mandatory Comprehensive Credit Reporting) Bill 2018 would give effect to the mandating of a comprehensive credit reporting regime. Under this regime, large authorised deposit-taking institutions, or ADIs—basically the big banks in Australia—must then provide comprehensive credit information on credit accounts to certain credit-reporting bodies. This is a principle that Labor supports.

In government, we made changes to the Privacy Act to facilitate voluntary comprehensive credit reporting. This gave credit providers the permission but not the requirement to share comprehensive credit information on customers' accounts. That took effect in 2014. In the lead-up to the last election, Labor promised a policy of introducing mandatory comprehensive credit reporting, which was dependent on the outcome of a review. As such, Labor supports the principles that are covered by this bill. However, it doesn't mean that we're giving the government a 100 per cent tick for what they've done. I'm flagging that Labor intends to move in the Senate amendments relating to the elements of consumer repayment history information and when that would take effect because, at the moment, there's a review going on that is being conducted by the Attorney-General's Department. It is a review of financial hardship arrangements. We feel that it would be better if that review was completed and the government received the findings of that review and was able to respond accordingly to that review before some of the measures in this bill take effect. We'll move those technical amendments in the Senate only, and we'll not be moving any of those amendments in the House.

As part of this bill, the scheme is meant to commence from 1 July 2018, with large ADIs required to collect information on accounts from 1 April 2018. The intention is to allow credit providers to obtain a comprehensive view of consumers' financial situation, enabling a provider to better meet its responsible lending obligations. The government claims that this scheme will benefit consumers by providing better access to credit and more competitive rates depending on an individual's credit history. It's argued that consumers would be able to better show their creditworthiness when seeking to enter the housing market, for example, or undertake other personal loans. The regime applies to eligible licensees, which are large authorised deposit-taking institutions with total resident assets in excess of $100 billion. So, basically, we're talking about the bigger banking institutions in Australia that hold a credit licence also in this country. Other credit providers may be included as prescribed by regulation.

The supply of information under this scheme includes an initial bulk supply of information and an ongoing requirement to keep that information up to date and accurate. The initial bulk supply is split into two years, with information on 50 per cent of consumer credit accounts within the banking group to be supplied by 28 September 2018 to all credit-reporting bodies that the large ADIs had contracted with over the last few years, as at November 2017. Information on the remaining 50 per cent of accounts, including those accounts opened after 1 July 2018 and those held by subsidiaries to large ADIs, is to be supplied by 28 September 2019.

The information that is provided to credit-reporting agencies is defined as personal information other than sensitive information, and I think that's a pretty important issue to distinguish. We're not talking about some of the sensitive personal information here in relation to consumer credit accounts. We're talking about other information associated with a person's identity; default information in respect of previous attempts at credit and successes at credit; payment information; new arrangements information; consumer credit liability information; and repayment history information. The regime in this bill will significantly increase the sharing of consumer credit liability information and repayment history information. The security and privacy of that information is no doubt a concern for people, and that is to be preserved and protected, relying on the existing protections that are currently enshrined in the Privacy Act and the privacy code, as well as the oversight of the Australian Information Commissioner. So Australians can have every confidence that their privacy and their information will be preserved under existing legislation.

While the regime will not alter the existing provisions, there is a new obligation on credit-reporting bodies as to where and how data is stored. This data must be stored in Australia or with a service that is listed by the Australian Signals Directorate as being a certified cloud service or that meets the conditions of the privacy code. ASIC is to be given responsibility for monitoring the compliance of the banks and the mandatory comprehensive credit-reporting regime. There are civil and criminal penalties in this bill which can be sought by ASIC for noncompliance with the regime. However, the Office of the Australian Information Commissioner will remain responsible for the compliance of credit-reporting bodies with the Privacy Act, including the rights of consumers to free credit reports and to have incorrect information corrected. So, if consumers have any concerns about false or incorrect information being circulated by some of these bodies in respect of their credit history, there will be a mechanism for some form of correction of that information. The Treasurer will receive statements from large ADIs and credit-reporting bodies to show that the initial bulk supply requirements have been met. There's also a review mechanism under which the Treasurer must cause an independent review of the mandatory regime to be completed and a written report provided to Treasury by 1 January 2022. The Treasurer must table the report at each house of parliament within 15 days of receiving the report.

I'd like to make a couple of comments about the financial hardship arrangements review. It's noted that in March 2018 the Attorney-General separately announced that there would be a review of financial hardship arrangements. This was to include how the current financial hardship arrangements intersect with consumer credit reporting frameworks. The review is expected to be completed in late 2018. I'm not sure if one side of the government is talking to the other side, but the timing of this review has been poor given that this comprehensive credit reporting regime, which involves the issue of financial hardship arrangements via the repayment history information, is meant to start on 1 July this year. Views from the Senate inquiry into this bill are testament to the issue that this has caused for many working in the industry and the lack of understanding of what the government is actually up to here with this deadline and the starting date for this legislation. A variety of stakeholders, including consumer groups, banks and credit associations, have all expressed concerns that consumers would be disadvantaged if repayment history information was provided prior to the Attorney-General's review being completed.

The joint submission from the Financial Rights Legal Centre, the Consumer Action Law Centre, Financial Counselling Australia, the Australian Privacy Foundation and the Australian Communications Consumer Action Network stated that the government to date has not addressed problems with the way financial hardship is treated within the repayment history information. The Australian Banking Association in their submission stated:

Without an agreed resolution and legislative change, the credit standing of those customers who are unable to meet their repayment obligations due to financial hardship are likely to be detrimentally affected. They are likely to be lumped together with those customers who simply don't comply with their repayment obligations.

Ideally, if the completion of the Attorney-General's Department's review can be brought forward, this increases the probability of a fairer and more favourable outcome for consumers, banks and other credit providers in the credit reporting system, and with the transition of RHI within the mandatory CCR legislation to be preceded by a settlement.

The Australian Retail Credit Association also acknowledged that there would be problems with the timing of the commencement of the CCR and the Attorney-General's review, and the Financial Rights Legal Centre stated that consumers will be negatively impacted if the regime started prior to the Attorney-General's review being completed. They supported a one-year delay to allow that review to be completed.

So there is strong evidence here in terms of the review and the feedback from the industry, and we think it's perfectly reasonable that the supply of repayment history information be delayed until after the Attorney-General's review is complete and the government has responded to its recommendations.

There are also, understandably, issues around privacy. A significant amount of Australian consumer credit data will be stored in one place, which does raise issues about breaches of privacy. We saw in the United States in 2017 the now-infamous data breach involving Equifax, where up to 140 million Americans had personal and financial data exposed, and it's important we have a proper framework in place to deal with potential risks such as this in the future. During the Senate inquiry we did hear evidence from the ABA that provisions in the bill were sufficient assuming that the Office of the Australian Information Commissioner could fulfil its role in relation to privacy laws. We trust that the government has actually done its homework on this issue and will continue to review whether the provisions put in place offer sufficient protection to consumers' personal and financial data. The issue of the benefits of the regime was also raised in the Senate inquiry. Whilst there was a suggestion the regime would be used to boost profits rather than maximise consumer benefits, we will monitor this element closely to see if consumer benefits are actually increased and whether or not detriment does occur.

In summary, Labor support the principles that are covered by this bill, but we won't be giving the government a green light on this. We intend to flag, as I mentioned earlier, moving amendments that will delay elements of consumer repayment history information by one year in the Senate. This will allow for the Attorney-General's review of financial hardship arrangements to be completed and for the government to respond appropriately.

Scott Morrison (Cook, Liberal Party, Treasurer) Share this | Link to this | Hansard source

I appreciate the House's time in moving this matter fairly quickly through this chamber to enable this important reform to be dealt with in the Senate at the earliest possible opportunity. The bill will increase competition in the lending market by reducing the credit data advantage held by the major banks. This bill is about empowering customers and making banks more competitive, which is what our banking system needs. We're all very aware of the many challenges that exist in the banking and financial system. We also know that our banking and financial system is fundamentally strong. We do not have any financial stability risks associated with our banking system. It is one of the most resilient banking systems in the world; but, that said, we do want a banking system that is more accountable, more sustainable and more competitive.

This measure is designed to achieve, in particular, a greater competitiveness, a higher level of competition, in our banking and financial system. It will provide more Australians with better credit opportunities and enable credit providers to make more responsible lending decisions. It's a game changer for customers and it will lead to better deals on mortgages, personal loans and small business loans. Customers with good credit histories will be able to obtain lower rates and be better placed to shop around, because their credit history will now become available to all credit providers. Others, whose previous credit histories only included default rates, will also get a better chance to demonstrate their credit worthiness, because there will be more credit information available on their reliability. So, when they're trying to get back on the horse, they'll get recognition for doing just that. Many small-business owners will gain better and faster access to credit, allowing them to invest more in their growing businesses. The US, the UK and New Zealand already have strong comprehensive credit reporting regimes, and we need to catch up to the rest of the world when it comes to this area. We shouldn't be delaying it; we should be getting on with it.

While credit providers have had the ability to voluntarily share comprehensive credit information since 2014, the take-up has been poor. Industry has not been able to resolve a critical first-mover problem and the system has not created sufficient critical mass to incentivise small credit providers to participate in the credit reporting system. This bill resolves this problem by requiring the four major banks, who currently make up more than 80 per cent of all household lending, to participate fully in the CCR system. Under these reforms, the four major banks must supply 50 per cent of their comprehensive credit information to credit reporting bodies within 90 days from 1 July this year. The information on the remaining accounts, including those that open after 1 July 2018, must be supplied within 90 days from 1 July 2019. This information must be supplied to every eligible credit reporting body—that is, every credit reporting body that meets the standards under the Privacy Act and had a contract with the bank on 2 November 2017.

Whilst the bill limits the initial mandatory bulk supply to these three bodies, nothing in the bill prevents additional credit reporting bodies from entering into supply agreements with credit providers and competing with the established bodies. The government strongly supports competition in the credit reporting market. Following the initial supply of information, the four major banks must keep the information supplied accurate, complete and up to date, including by supplying information on subsequently opened accounts. At this point in time, the government does not propose to extend this mandate to the next tier of credit providers. We believe that the critical mass delivered by the major four banks will be sufficient. However, if participation is inadequate, the government could mandate certain credit providers through a regulation-making power in this bill.

The security of customer information is also our highest priority. Under these reforms, the Australian Information Commissioner will continue to have oversight over the management of Australian personal data, including credit information. Banks will continue to use their bilateral arrangements to perform audits and ensure that the credit-reporting bodies continue to upgrade their security systems to meet the changing threat environment.

In addition, this bill will strengthen the privacy and security provisions established under the Privacy Act. We are extending the security provisions under the Privacy Act to ensure that all credit-reporting bodies store their data in Australia or in a secure cloud service certified by the Australian Signals Directorate. We are requiring credit providers to satisfy themselves that a credit-reporting body is meeting reasonable security standards before they supply the mandatory credit information. The inclusion of these provisions follows extensive consultation with industry, consumer advocacy groups and security agencies and will allow Australians to rest easy, knowing that credit-reporting information is stored safely and securely.

Where credit providers and credit-reporting bodies are subject to requirements under the bill, they will be subject to penalties if they fail to comply. Enforcement of these requirements will be the responsibility of the Australian Securities and Investments Commission, ASIC, who will be granted the appropriate powers to collect information and require audits to confirm that these requirements are being met.

Credit providers and credit-reporting bodies will also be required to provide statements to the Treasurer in January of 2019 and 2020, certifying their compliance with the initial supply provisions of the bill. The mandatory-reporting regime recognises that industry stakeholders have already taken steps to support sharing comprehensive credit information. To the greatest extent possible, this bill allows industry participants to continue to benefit from the protections and principles embedded in the existing industry-established framework.

This bill also requires government to conduct a statutory review of its operation prior to 1 January 2022, with a written report to be tabled in parliament within 15 days of receipt. This will provide an opportunity to review whether the bill has met its objectives and whether legislation needs to be updated to adjust the scope or operation of the comprehensive credit-reporting system.

This bill is in response to the recommendations made both by the Financial System Inquiry and in the Productivity Commission's inquiry into data availability and use. It is time to move forward with this. There have been the reviews. There have been the consultations. The model has been worked up. There has been the opportunity for industry to adopt this independently. We have done all this; it's now time to get on with it and to ensure that customers get the best possible deal in this country from the banking and financial system. This is a further tool that they will have. This is a further armoury for them, to ensure that customers in our banking and financial system are empowered with their own information, their own data, and that we take advantage of the significant revolutions that are taking place with respect to data as a source of value for customers to be used to ensure that they can get the best services and the best financial products that are available to them.

The bill will improve the operation of our lending markets. It will improve competition, and it will reduce the credit data asymmetry between the four major banks and the smaller lenders. There have been enough excuses for not moving ahead with this in the past, and the time for excuses on moving ahead with this has now also ended. It's imperative for us to move forward with these important reforms, as we are in so many areas in the banking and financial system. For that reason, I commend the bill to the House.

Question agreed to.

Bill read a second time.