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The industry body has responded to the issues paper into the independent review of Australia’s credit reporting framework.
The Mortgage & Finance Association of Australia (MFAA) has outlined its recommendations in support of the Treasury in developing the issues paper into the independent review of Australia’s credit reporting framework.
In a submission to Attorney-General’s Department, Naveen Ahluwalia, MFAA’s executive policy and legal, stated that recommendations are based off roundtable discussions between broker members.
“[T]he credit reporting system is integral to providing brokers with comprehensive information about their clients to enable them to meet responsible lending and mortgage broker best interest duty obligations, and to recommend products that best suit their clients’ circumstances and needs,” Ahluwalia said.
Additionally, the discussions outlined the opportunities to improve information asymmetry and quality across credit reporting bureaus to “improve timely access for credit to broker clients” as well as the need to support greater consumer understanding of credit reporting overall.
Recommendation 1: Explore opportunities to improve information asymmetry between credit reporting bureaus (CRBs)
According to the MFAA, it has observed inconsistencies in reporting by multiple CRBs, which have contributed to a disparity in the information contained within consumer credit reports.
“This inconsistency between the information held within these reports, for example credit scores, open accounts and the like negatively impacts consumers and can lead to difficulties in securing credit,” Ahluwalia said.
The MFAA has identified an opportunity to build consistency in the supply of credit reporting information by credit providers to CRBs through the credit reporting data standards.
“…and through incentivising further signatories to the Principles of Reciprocity and Data Exchange (PRDE) which in turn we suggest will flow into more consistent consumer credit reports,” Ahluwalia said.
Recommendation 2: Explore opportunities to extend comprehensive credit reporting (CCR)
The second recommendation outlined that completeness of information on a credit report is “imperative” to support competition and consumer choice.
The MFAA stated that CCR “enables a deep understanding of an individual’s credit position which allows for better credit decisioning”.
“As the non-bank lending sector continues to grow, and there is further innovation in non-bank lending products such as buy now pay later, we suggest there is an opportunity for comprehensive credit reporting to include a complete range of (regulated) non-bank credit products a consumer may have access to,” Ahluwalia said.
Recommendation 3: Explore opportunities to integrate credit reporting and CDR frameworks
The association has recommended that aligning the data standards between Consumer Data Right (CDR) and CCR could come with benefits of “harmonising data collection methodologies” in order to ensure consistency of data formats while establishing “unified guidelines for the reporting and sharing of information”.
“As the CDR framework continues to mature and expand to different sectors of the economy, reviews such as this one continue to explore opportunities to ensure that the CCR and CDR framework complement each other, with the aim to deliver more streamlined processes for obtaining credit, refinancing or switching products,” Ahluwalia said.
Recommendation 4: Ongoing investment by the government to support a whole of industry approach to the development of educational resources
The final recommendation aims to improve financial literacy among consumers.
Financial literacy “remains low” despite investments from organisations such as ASIC, which has prompted the MFAA to push for continued investment in developing financial literacy resources for consumers to better understand credit reports, credit scores, and positive credit behaviour.
The MFAA noted that brokers act as a “first point of contact for many consumers looking for a loan” and that they provide significant financial literacy and budgeting support to clients.
“In particular, for certain consumers (for example those who are vulnerable or experiencing hardship), brokers provide critical services to support these consumers with respect to their credit history, including understanding their credit reports,” Ahluwalia said.
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