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New 'Comprehensive' Credit Reporting System a 'Mixed Bag' for Consumers

11 March 2014

From tomorrow, the new ‘comprehensive’ consumer credit reporting system will come into effect in Australia, with the new system bringing both advantages and disadvantages for Australian consumers.

Under the old credit reporting system, only ‘negative’ information was able to be reported against consumers (e.g. a utility bill 60 days or more overdue), whereas under the new system, credit providers will now also be able to record ‘positive’ information against a consumer record.

The Salvation Army Moneycare Financial Counsellor, Debbie Hannaway, says people who have found it difficult to obtain credit in the past may find it easier under the new system.

“Under the old system, people who may have inadvertently missed a payment of a utility bill and who otherwise have had a positive credit card, personal loan and mortgage repayment history may have been denied credit because financial institutions have not had access to this ‘positive’ information,” Ms Hannaway said.

“The new system should allow financial institutions make better lending decisions.”

While the new comprehensive credit reporting system does have positives, it could also mean low income individuals and families possibly facing higher costs for credit in the future.

“There is a real possibility that what we’ll see in Australia is much like what happens in the United States and other nations with ‘comprehensive’ credit reporting systems… lenders introducing risk-based pricing based on consumer credit scores,” Ms Hannaway said.

“This means people on low incomes who may have missed one or two credit card or personal loan repayments being penalised with higher interest rates which ultimately impacts their capacity to repay, thereby further entrenching the cycle of disadvantage. Consumers need to be aware that late and missed credit card, personal loan and mortgage repayments made 5 days after the due date will now also appear on their credit report, not just defaults, like under the old system.”

People who have concerns about their financial situation can obtain free and confidential support and information through The Salvation Army’s Moneycare Financial Counselling Service by visiting salvos.org.au/moneycare

The Salvation Army acknowledges the Traditional Owners of country throughout Australia and recognises their continuing connection to land, waters and community. We pay our respects to them and their cultures; and to elders both past and present.

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