Understanding The Australian Credit Reporting System

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• Credit Reporting in Australia is regulated by the Privacy Act 1988(Cth) in particular (Part III A) of the Act and is supplemented by the Credit Reporting Code of Conduct which took effect from 24 September 1991. The Act governs what information may be published on a credit file. The typical information recorded on a file identifies an individual or corporation, records events of public record such as Bankruptcies, Administrations or Judgments and records information which go to credit worthiness such as defaults.

• Until recently Australia operated a system which recorded only Negative information. In 2014 Australia will move from a Negative Credit Reporting System to a Comprehensive or Positive Credit Reporting System. This will result in a larger volume of information being recorded on a credit file; its aim is to allow Credit Providers such as banks to access more accurate information when making a decision as to credit worthiness.

• The new system much like the old draws a distinction between consumer credit and commercial credit. Nothing has changed as far as the Privacy Act only regulating Credit Reporting activity that results from credit obtained for consumer or domestic purposes. Commercial Credit operates in no man’s land with little or no regulatory rules governing its publication on a credit file.

• Since the Global Financial Crisis lending has tightened by placing greater significance on Responsible Lending Practices. This is furthered by NCCP Legislation which places the onus of providing a suitable loan to a borrower on the lender and the lenders representatives. The importance of information recorded on a credit file is in today’s economic climate is of greater significance than ever before.

• A credit file is at best an insight as to credit worthiness and as such must be governed in strict compliance with the prevailing legislation. In the last four years Australia has benefited from the emergence of Credit Repair Companies which undertake on behalf of their clients a means of challenging information appearing on a credit file which is inaccurate. The emergence of these organizations was primarily fueled by consumer demand for improved credit worthiness.

• Credit Repair organization have proven to be an invaluable tool for Finance Professional who have clients which present with credit file problems, by assisting with the placements of loans which would otherwise be declined if not for their intervention.

• Individuals or corporations should be educated as to the importance of their credit history which is essential as to financial well being. This concept must also be adopted by professional offering advice to clients such as Finance Brokers or Financial Planners, for failure to do so shall be at the peril of their clients.

This opinion piece was written by Joseph Trimarchi Solicitor it is written for educational purposes only and should not be construed as legal advice.
Regards
Joseph Trimarchi Solicitor
March 2013.