9th October 2012 – A coalition of consumer groups is urging the Federal Government to reconsider aspects of its planned credit reporting reform which could see Australians have their credit history tarnished for late payment of amounts as little as $100. In a recent discussion paper on credit reporting regulations, the Government proposed not to increase the minimum debt that can be listed on a credit report beyond $100.[i]
The consumer groups believe the minimum amount for which consumers should have their credit history marked should be increased to $500—and both the Energy and Water Ombudsman NSW[ii] and the Senate Legal and Constitutional Affairs Legislation Committee[iii] have proposed the amount be increased to $300.
Spokesperson Kat Lane of Consumer Credit Legal Centre, said ‘under the current proposal someone’s ability to access a home loan could be ruined by one overdue electricity or phone bill.’
‘It’s easy to fall 60 days behind on an energy bill—it could be something as simple as the bill being sent to the wrong address or the account holder being away from home for an extended period. I don’t think many people would think this should affect someone’s ability to get a home loan,’ said Ms Lane.
‘If the amount for which someone could have a default listed on their credit report was increased to $500, people would be far less likely to be overly penalised for one overdue bill or for making one simple mistake.’
Ms Lane said many small debts listed on credit reports were utility or phone debts and didn’t necessarily reflect a person’s suitability for credit. She also said that smaller debts, such as phone or utility debts, are often disputed by consumers.
‘We’d hate to see someone’s credit history affected because of an outstanding bill which they don’t even owe. Billing mistakes do happen and, as the Government’s plan currently stands, these small mistakes could have big consequences.’
The advocates also issued a warning about the Government’s planned introduction of ‘comprehensive credit reporting’ which will give businesses access to much more detail about someone’s financial history.
‘Australians will soon have their credit history and repayment habits recorded in greater detail. Government and industry tell us this will lead to more responsible lending, and while this information could assist with credit decisions, it’s also likely to be used by credit providers to push more credit.
‘If comprehensive credit reporting is introduced, Government and industry needs to make efforts to explain the new regime to consumers, especially that repayment information such as whether you repay your loans on time each month will be now listed on credit reports, and consumers’ rights to make complaints if there are disputes,’ said Ms Lane.
Kat Lane – Consumer Credit Legal Centre NSW – 0447 620 694
Dan Simpson – Consumer Action Law Centre – 0413 299 567
Consumer organisations: Financial Counselling Australia, Australian Privacy Foundation, Consumer Credit Legal Centre NSW, Consumer Action Law Centre