Just thought I would post this for debate for people who may not have read it, its from the realestate.com newsletter:
Lenders will be able to pry deeper into people's financial histories providing a much better picture of a person's total debt under proposed laws.
real estate review
Everybody applying for a credit card or a new loan will have to agree to give up much more information about their financial history and circumstances under compromise proposals now before the Rudd Government.
However, the Australian Law Reform Commission rejected calls by banks and credit agencies for comprehensive reporting of credit applicants' financial history. They wanted access to complete repayment histories but will have to settle for a lot less.
Commission president Professor David Weisbrot said more information would lower the cost of credit to low-risk borrowers and high-income earners.
"On the other hand, consumer groups were not convinced that more information would be used to assist responsible lending, rather than to advance more credit and contribute to higher levels of indebtedness."
After launching the commission's report, Prof Weisbrot suggested that comprehensive credit reporting, as called for by lenders, could lead to a US-style sub-prime crisis.
The commission recommended that credit reporting agencies should be allowed to collect four additional items of information: the type of each current credit account opened (for example, mortgage, credit card, personal loan); the date opened; the credit limit; and the date closed.
In effect, credit agencies will provide a much better picture of a person's total debt, without showing repayments or missed repayments, except those that lead to defaults.
That's a big step up from what is now allowed, which is defaults on credit, loans or bills and applications made for credit products. Lenders do not get a complete readout of everything that people owe and how they are going with repayments.
Such reporting could work against good borrowers said Geoffrey Chester, a debt administrator with Debtcutters in Wellington Point on Brisbane's bayside.
"I have a client who moved and didn't pay his $90 phone bill, which became a default on his file," Mr Chester said.
"When he went for a home loan he was forced to the predatory end of the market where he has to pay thousands more in interest and fees for a low-doc mortgage.
"All because he had a default listed on his credit reference file."
The Law Reform Commission's compromise approach was welcomed by consumer groups. "We have been concerned for a while that lenders were using people's credit reports not only to assess them for a loan, but also to pre-screen them for marketing offers," said Nicole Rich, a solicitor at Victoria's Consumer Action Law Centre.
"This is an inappropriate use of private personal information and we support the recommendation that it be prohibited."
The centre also supports other recommendations such a minimum amount below which a debt cannot be listed on a credit report.
Lenders will be able to pry deeper into people's financial histories providing a much better picture of a person's total debt under proposed laws.
real estate review
Everybody applying for a credit card or a new loan will have to agree to give up much more information about their financial history and circumstances under compromise proposals now before the Rudd Government.
However, the Australian Law Reform Commission rejected calls by banks and credit agencies for comprehensive reporting of credit applicants' financial history. They wanted access to complete repayment histories but will have to settle for a lot less.
Commission president Professor David Weisbrot said more information would lower the cost of credit to low-risk borrowers and high-income earners.
"On the other hand, consumer groups were not convinced that more information would be used to assist responsible lending, rather than to advance more credit and contribute to higher levels of indebtedness."
After launching the commission's report, Prof Weisbrot suggested that comprehensive credit reporting, as called for by lenders, could lead to a US-style sub-prime crisis.
The commission recommended that credit reporting agencies should be allowed to collect four additional items of information: the type of each current credit account opened (for example, mortgage, credit card, personal loan); the date opened; the credit limit; and the date closed.
In effect, credit agencies will provide a much better picture of a person's total debt, without showing repayments or missed repayments, except those that lead to defaults.
That's a big step up from what is now allowed, which is defaults on credit, loans or bills and applications made for credit products. Lenders do not get a complete readout of everything that people owe and how they are going with repayments.
Such reporting could work against good borrowers said Geoffrey Chester, a debt administrator with Debtcutters in Wellington Point on Brisbane's bayside.
"I have a client who moved and didn't pay his $90 phone bill, which became a default on his file," Mr Chester said.
"When he went for a home loan he was forced to the predatory end of the market where he has to pay thousands more in interest and fees for a low-doc mortgage.
"All because he had a default listed on his credit reference file."
The Law Reform Commission's compromise approach was welcomed by consumer groups. "We have been concerned for a while that lenders were using people's credit reports not only to assess them for a loan, but also to pre-screen them for marketing offers," said Nicole Rich, a solicitor at Victoria's Consumer Action Law Centre.
"This is an inappropriate use of private personal information and we support the recommendation that it be prohibited."
The centre also supports other recommendations such a minimum amount below which a debt cannot be listed on a credit report.
