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ISCOVER
Many brokers are unaware of what positive credit reporting will mean for their clients as it is still early days.
There are four main levels of credit reporting which lenders can choose from:
1) None
2) Like it is now: displaying defaults, writs, summons and judgements and inquiries
3) Loans made
4) Repayment history
The third and fourth points are what concerns many people. Currently, one lender cannot see if a person has been declined elsewhere. So it is easy for people to lie when asked the outcome of an inquiry on their credit report by saying they did not proceed of their own accord when in fact they may have been declined.
Late payments and any small blemishes will appear, whereas now they don't.
Currently, brokers must make reasonable enquiries and follow responsible lending standards, although there is no case law determining the correct interpretation of responsible lending. They will be known as an 'access seeker' when obtaining a credit report for a client.
Brokers can obtain a credit report of their client, but must not send that to a lender even though it may impact on responsible lending. This is a catch-22. The broker becomes aware of something but is not allowed to share this with the new lender. That’s because this may violate privacy laws if the new lender has not elected to take part in the level of sharing of information that is on the report. The broker is probably obliged to seek permission from the customer to share this pertinent information, and if the customer refuses the broker should make a decision to continue servicing that customer. That customer would possibly be viewed as dishonest.
Some believe that the full extent of credit reporting may not see the light of day. There are broker committees and lender committees involved in making decisions – but we all know how useless meetings can be, with lots of talk and little implementation. Many people spend all day in meetings feeling important but often very little gets done.
There is a risk there will be a severe lack of uniformity with positive credit reporting. Let's hope it is not as open to interpretation as responsible lending is. Different lenders have different perceptions and it has not been tested.
