Article describing the new credit and privacy laws

Peter_Tersteeg

Peter_Tersteeg

There's been a few questions about the new privacy laws and credit reporting. this article explains the parameters around this.

http://www.yourinvestmentpropertyma...ing-changes-what-you-need-to-know-185304.aspx

After 12 March 2014:
A "default" is listed on your credit file for being late by 60 days or more and for amount you owe over $150. This stays on your history for 5 years.

After 12 March 2014:
Your repayment history is reported when you?re five or more days late in paying. This stays on your history for 2 years.
Click to expand...

Additionally some very useful tips:
1. Pay your loans and bills on time
2. Do your homework before applying for credit
3. Check your credit report well before you apply for credit or a loan
4. If you move house, notify lenders
5. Keep track of your credit record
Click to expand...
 
If those companies choose to participate, it will include utilities companies (water, electricity, council, phones, etc). All of these companies use credit reports as well.
 
The changes sound harsh. But presumably an odd default here or there won't affect most people? The banks can't afford to suddenly cut back their lending by 75% just because people have just a few late payments.
 
Geoff it's data collection and reporting. How each lender uses it will depend on their risk appetite and how they interpret the information.

A few weeks ago I attended a seminar where this was one of the major topics and the lending risk appetite was described as follows.

If today we see a bell curve which represents how people are assessed for risk. Certain lenders will have a cut off on this curve for the lowest 10%. Today there are some people below the 10% cut off point who should be able to qualify for a loan and there are some people above the 10% cut off point who turn out to actually be high risk and default on their loan.

The additional information will help lenders to identify those anomalies above and below the line and make the correct risk assessment decision for those people.

Overall I don't think it will make much difference to most people out there. The number of people who are actually affected by this (for better or worse) is likely to be fairly small.
 
mikezen said:
What I would like to know is, does this apply to non credit type of bills such as water rates electricity etc?
Click to expand...

Yes, unfortunately. if you are more than 60 days overdue on a utility or telco bill and the debt is $150 or more, the utility/telco will provide this information to credit reporting agencies as a default and it will stay on your credit file for 5 years.

Not only for PPOR,
For investors with IPs, this could be fixed water charges, sewerage or water consumption charges that IP owners have agreed to pay a pre-determined amount

According to Veda:
http://www.veda.com.au/yourcreditandidentity/check/credit-file/what-looks-bad-my-credit-report

"Before listing a default, the credit provider has sent a written notice seeking payment of the overdue debt and a written notice stating that the default may be listed with a credit reporting body. (Hope written notice will be sent first before reporting default)

Once you've paid the overdue debt, the credit provider is required to update the listing on your credit report as soon as is practicable. (What if they forget to update that you paid?)

If the overdue debt is classified as a serious credit infringement, where you have left or appear to have left your last known address, the credit provider must first have listed a default and must have had no contact with you for the preceding 6 months". (What if you had died?)

Because telco and utility coys are not licensed credit providers, they do not provide or share information about Repayment History Information (RHI) from Dec 2012 to Veda (for the moment)

Hence they have not provided information to Veda about whether you have paid your utility/telco bill on time or late and how late. (yet)

Therefore the black mark for 5 days late will not apply to telco and utilities from Dec 2012 (yet).

"But Steve Brown from Dun and Bradstreet, one of the biggest credit agencies, thinks changes need to go further. He believes missed payments on electricity, gas, water and phone bills should also be recorded".

http://www.abc.net.au/news/2014-03-...n-using-new-power-to/5311072?section=business

The black mark for 5 days late will apply to credit cards, mortgages, personal loans and car loans retrospectively from Dec 2012
 
Last edited:
Beanie Girl said:
Yes, unfortunately. if you are more than 60 days overdue on a utility or telco bill and the debt is $150 or more, the utility/telco will provide this information to credit reporting agencies as a default and it will stay on your credit file for 5 years.

Not only for PPOR,
For investors with IPs, this could be fixed water charges, sewerage or water consumption charges that IP owners have agreed to pay a pre-determined amount
Click to expand...

Sigh! I know we are supposed to put on a brave face and suck it up with this new credit reporting system but I find to be put in credit hell for minor infractions that are not your fault to be more than a tad unfair.

For instance, if you find mistakes in the credit card e.g. wrong charges, double charges, fraudulent charges, any person of sound mind is not going to pay the credit card bill by the due date till the anomalies are dealt with satisfactorily and that may entail missing the due date by more than 5 days. But then, that black mark goes in for 2 years and you have to spend time and probably money to scrub it out of the credit report with a credit repair company. What a waste of life to be constantly having to monitor your credit report in case of errors as well. It's an administrative overhead in terms of time and stress that people don't need.

Regarding utilities and telco bills,
I never direct debit my water, gas, electricity and phone bills because often times they are just plain wrong. Recently I got charged an extra $800 for my water bill and upon investigating it, it was found that the water reader read my water meter wrongly. I refused to pay the bill till they sent me a new bill and I had to prove it by taking a photo and there was some to-ing and fro-ing with the water company before they reluctantly issued a new bill 1-2 weeks later.

So if it ever came down that a black mark for 5 days late was going to be implemented for telcos and utilities, how do you reckon it'll take into account having to pay late because of wrong readings/wrong data on the part of the utilities/telco coys?

Sigh! Okay, rant over.
 
From what has been said, it doesn't appear that the odd late payment will be a problem- at least, when the system has been in place for a while.

A history of late payments showing a pattern is another thing.
 
geoffw said:
From what has been said, it doesn't appear that the odd late payment will be a problem- at least, when the system has been in place for a while.

A history of late payments showing a pattern is another thing.
Click to expand...

No one knows at this stage plus most major banks won't even have their information recorded until the end of the year.
 
I'm referring to post #5 above.

I can't see banks refusing loans on the basis of one late payment. They'd have nobody left to lend to.
 
This wont happen overnight, when you consider the amount of data that would need to be processed. It will be work in progress.

It is also not compulsory for agencies/banks to provide this information. If information is provided to Veda etc. legally this can not happen unless you are advised in the first instance.

Which reminds me... I received a letter yesterday from BOQ (savings account) advising of the new laws and information pertaining to my account may be accessed etc. I expect I will be receiving notification from other banks regarding this.
 
While it might not be happening overnight it will be applying to transactions starting from late last year.

I suspect a lot of institutions will start to have fewer late payments.
 
Sign up to veda alerts to nip in the bud any issues early on. This also includes identity theft.

If you have an issue try mycra.

Also set up Calender reminders for bills.
 
I love how this is getting a massive scorn in the media given:
1) pay your bills and you're unaffected
2) hasnt been any info on lenders policy for judging the info.
 
I've been asking representatives from lenders for months about this. None of them have any idea how they'll be applying it. For the moment it will be business as usual.

A couple weren't even aware of it.
 
I was also curious as to why the banks would be passing on information regarding my savings accounts? What for?? Its not a loan, for purpose of tracking repayment history??

The lender would be interested in viewing loan statements which happens now anyway.

This is all very confusing as I have made some general enquiries and no one really knows anything, or giving different versions, nothing like what has been described in the media.??
 
b simpson said:
Sign up to veda alerts to nip in the bud any issues early on. This also includes identity theft.

If you have an issue try mycra.

Also set up Calender reminders for bills.
Click to expand...



This is something I will be doing.

I have overdrawn on my credit card a number of times, wow, I hope this wont hurt.
 
MTR said:
This is something I will be doing.

I have overdrawn on my credit card a number of times, wow, I hope this wont hurt.
Click to expand...

About 12 months ago we applied for a loan where the client had a card with a particular lender, we figured having loans and banking in the same place was a good option and it was the clients first home. The client had been significantly late paying the card several times in the last 12 months so the application was rejected. It's didn't go into default, but he was just constantly late.

We put the deal to a different lender, they knew nothing about his credit card history so they approved the loan.

Some things to consider if this had been done under the new credit laws:

1. This deal might have been much trickier to get done and not a good outcome from the client. Other lenders may have seen that the history on the clients card was not good and similarly rejected the loan as the first lender did.

2. On the other hand the first lender may have seen that this client pays other bills on time (I don't know if this is true, but let's assume he did). With a good payment history offsetting the late credit card, the first loan might have been approved.

3. We got this done by taking advantage of the second lenders ignorance. We certainly put the borrowers interests ahead of the banks and I don't loose any sleep over this (he is paying his mortgage on time). It does beg the question though, if you know someone was consistently late paying their bills, would you really want to lend money to them? As investors we don't like tenants who always pay a week late, even though they do pay eventually.
 
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