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ISCOVER
In 2014, a number of changes were made to Australia’s credit reporting system, paving the way towards the introduction of comprehensive credit reporting. But what does it mean for you and your clients?
To help separate fact from fiction, the Australian Retail Credit Association (ARCA) and its consumer website CreditSmart.org.au answers common questions on applications, credit history and credit reports.
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My client was told they need to pay to remove a default. Is this true?
This is untrue. If a default can be removed, meaning it was incorrectly entered, it can be removed for free. But the client should first confirm if it is in fact a default on a credit report or a late payment.
A default is not the same thing as a late payment. A late payment is generally less serious than a default, and might appear when your client has missed a payment for over 15 days. If your client makes one or two late payments because they missed a bill while they were on holidays, this may also be offset by the overall positive history of your client in paying their accounts on time. Of course, if they pay their bills as late payments every month, this may actually impact their credit-worthiness.
A default can only be recorded on a credit report when a person has payments of over $150 overdue by more than 60 days, and received certain specific written notifications from the credit provider. A default can be recorded on your client’s credit file by licensed Australian credit providers, as well as other organisations that use the credit reporting system such as telecommunications and utilities companies. If your client has a default, it should no longer appear on a credit report if it is over five years old.
However, if the default was an error or incorrectly entered, a customer can take steps to fix the error easily and free of charge.
If your client believes a default was incorrectly entered into their credit report, they can contact their credit provider or the relevant credit reporting body, which will then investigate and fix any incorrect information on the credit report. If the matter is not addressed in a timely manner, your client can make a complaint directly through an ombudsman, such as the Financial Ombudsman Service or the Credit and Investments Ombudsman, or the credit reporting regulator, the Office of the Australian Information Commissioner.
Along with the Australian Competition and Consumer Commission (ACCC), ASIC and consumer groups, ARCA and the credit reporting industry in Australia is concerned by the credit repair industry, as there have been many cases where operators exploit vulnerable consumers by misleading them. They do so by overstating their ability to improve a client’s credit report and charging large upfront fees for services most people could perform themselves for free.
We urge brokers to encourage their clients to take charge of their own credit report. For correction requests, all the contact details for credit reporting bodies are available on CreditSmart.org.au.
[Related: Answering common questions on credit reporting – part 1]
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