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The Albanese government has announced plans to build a CDR framework to “better serve consumers”.
Assistant Treasurer and Minister for Financial Services, Stephen Jones MP, has announced that the federal government will reset the Consumer Data Right (CDR) in order to deliver “better consumer outcomes”.
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According to the minister, CDR has the “potential to deliver real economic transformation” and said that the former government’s “poor execution” has meant that the cost to implement CDR into businesses is too high.
“The Government’s will resolve these issues to ensure Australians can unlock the value of their data,” Minister Jones said.
“In doing so, we will reduce friction within the CDR to improve cost-effectiveness, take-up, and deliver better financial outcomes for consumers.”
The government has outlined several ways it has attempted to improve the CDR framework that included:
- Opening consultation on changes to consent and operational rules. The proposed changes will streamline consent for consumers, by enabling them to provide multiple consents in a single action.
- Releasing the Heidi Richards report, Consumer Data Right compliance costs review, which found that the regulatory costs of implementing the CDR on its current track are substantial.
- Writing to the chair of the Data Standards Body to secure alignment with our direction for the CDR.
- Signalling the intention to expand CDR to non-bank lending in early 2025, making it operational by mid-2026 to provide a sufficient transition period.
“The Albanese Government is focussed on getting the existing CDR framework on more sustainable footing. After passage of the action initiation bill, the Government will not rush to declare new action types until the CDR is back on track,” Minister Jones said.
“The Government encourages all interested parties to make a submission in response to the consultation paper for the proposed changes to consent and operational rules, which can be found on the Treasury website.”
The Albanese government has confirmed that submissions will close on 9 September 2024.
Reacting to the decision, general manager for policy and advocacy for consumer credit association Arca, Michael Blyth, said the minister has “hit the nail on the head”.
“The CDR has significant potential but hasn’t been providing bang for buck,” Blyth said.
“We are pleased the Minister has identified that consumer lending is the highest priority use case, and recognised that changes need to be made to allow lenders to use the consumer data right to provide credit more efficiently and responsibly.”
Blyth further said that while Arca agrees that screen scraping needs to cease, the current limitations of the CDR mean that “it remains necessary for many credit providers”.
“[The] announcement opens up a pathway to allow for this change, and we will work with our members on how we make transitioning away from screen-scraping achievable,” Blyth said.
Brokers slam ‘blatant shutdown’ of CDR regime
On 3 July, the Australian Banking Association (ABA) released findings of a strategic review undertaken by Accenture into the roll-out of the CDR regime and suggested that there was little hope that its objectives would be realised.
According to the report, the banking industry has invested around $1.5 billion into CDR since 2018, but only 0.31 per cent of bank customers were using it (and more than half of data-sharing arrangements had been discontinued or allowed to lapse throughout the year).
Noting the high compliance costs (which are disproportionately higher for smaller banks) and the alleged lack of competitive benefits, the ABA called the open banking regime a failure and suggested that the government should “go back to the drawing board”.
However, founder and CEO of repricing fintech, Adam Grocke, called the banking industry’s attempt to stall open banking’s progression “a blatant shut down” campaign from banks to reduce competition.
He told The Adviser at the time: “CDR, and in particular action initiation, scares the living daylights out of the banks because they lose control of the customer and competition increases. Not advancing CDR pushes the industry back into the Dark Ages.
“CDR increases competition, gives Australians freedom and choice, increases productivity and innovation. We all know increased competition equals better deals and savings for Australian home owners and therefore results in the banks losing market share … No wonder they care so much to have a strong opinion on its success.
“We’re at the ‘laying the foundation’ stages of CDR. Saying it’s costing too much and that there are no results is like looking at a freshly poured slab of a new house and saying let’s stop because there’s not a house yet. It’s just crazy! The foundations have been poured, now it’s time to build a masterpiece.”
[RELATED: Broking fintechs slam ‘blatant ‘shut down’ campaign’ on open banking]
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