New Credit Reporting Proposals

[Dave Noble]

Not directly credit card related , but since it may affect the ability to get credit thought some might be interested in the proposals that looks likely to go into effect

From The Australian Law Reform Commission site

http://www.pmc.gov.au/privacy/alrc_docs/stage1_aus_govt_response.pdf

Section 5 , pages 105-128 are interesting on what is proposed. Moving away from a negative reporting system more towards a reporting system as might be found in UK , where details of credit limits and payment history will be maintained


Dave

 

[chrizzz14]

eh... soon enough they'll be recording what we spend the credit on!

 

[serfty]

eh... soon enough they'll be recording what we spend the credit on!

Most companies do already, but have to keep it to themselves by law.

To enable such information to be shared would outrage privacy advocates.

 

[greenfrog86]

Very true...

The key elements of the proposed changes include

• greater visibility of the credit currently available to a consumer (ie how many products they have, and the limits)
• 'payment history' - not as detailed as you might think, however there could be the option of listing an 'overdue payment' around two months after it was due rather than the current model of just reporting accounts that are seriously delinquent
• more clarity around what can and cannot be included in a credit file

Whilst this might be referred to as 'comprehensive credit reporting', remember that credit files contain the simplest form of information, and as is rightly mentioned here will not contain anything along the likes of spending habits etc

I would imagine that these changes would impact on some of the practices of some members here...it may become more difficult to 'churn' accounts to gain bonus sign-up points, and there will be no opportunity for people to 'forget' to disclose accounts with other organisations...

This seems to be some way off yet, and will be very public when it does get implemented...

Overall I personally think it is a good thing, and will assist those 'good customers' (many of which are AFF members ) and their relationship with their lenders...

 

[Dave Noble]

Yes; the details of current existing accounts being there for others to see may well assist in reducing people being able to apply for large numbers of cards and ending up with large potential debts

What I would like to see on the other side of the fence a requirement for proper disclosure of key aspects in advertising

e.g. on tv there is an advert for Citibank cards. It suggests that can save $1000 a year ( based on 18% APR ) by moving credit balances to Citibank at 1.99%. What they fail to mention unless you read the small print which is in light grey on the website that the APR on the citicard is 19.99% and that payments will go towards the balance transfer and so... if the consumer actually uses the card will end up paying 19.99% on interest


Dave

 

[Diesellife]

IMO, the new information to list on credit report is not sufficient which will cause the refusal of credit application.

E.g. The account limit only, it does not show the balance. For some of us as transactor, its kinda unfair as bank will mostly to use the "worst senario model" without any supporting facts within the report.

Surely, I love my limit. Not that I needed it, nor I will rack up big debt for that matter, but I would definitely like to keep mine and still be able to apply for credit when I need to....

Also, without remaining balance as an attribute in the credit report, the interest differential offering would not introduce. Just like the US or many other countries, the interest rate should be different according to the given risk. Good people with good history should be given the cheaper rate:mrgreen:

 

[munitalP]

Ask a few new zealanders how these similar law changes affected them 10 years ago... late on a telecom bill or power bill, bad credit

Mark my words, it will get out of control and will only benefit credit reference providers in the end as they will have mass inquiries placed on them and more and more "bad" creditors will occur...

I have seen it happen and its not good.


Mr!
:evil:

 

[Diesellife]

At least the bad (single missing payment) will stay there for 2 years only... and currently all entries stay there for 5 years.

And massive enquiries (After 3 months - 6 months) will be rated less important as opposed to the current system.

There are goods and bads... just need to know how to play their game... but I still can't figure out how to obtain extra credit without reducing my current limit.

 

[greenfrog86]

At least the bad (single missing payment) will stay there for 2 years only... and currently all entries stay there for 5 years.

And massive enquiries (After 3 months - 6 months) will be rated less important as opposed to the current system.

There are goods and bads... just need to know how to play their game... but I still can't figure out how to obtain extra credit without reducing my current limit.

The idea is that you really can't avoid that - the principle is that if you have a combined 20k set of limits (even if you only have 5k on there at any time) you could at any stage spend that amount, and be liable to pay the minimum payments on that total amount...

This is the premise of Diesellife's comment above, and forms the basis of current credit assessment procedures. Basic formula is total possible outstanding, divided by amount that could be requested (ie 2.5% of total balance as mmp). This is then factored into your living expenses compared to income.

The key issue with the current system, is that the above formula requires you to be honest for it to work - the new proposal will mean this information can actually be verified...

Looking at my current limits, they are just over two thirds of my annual income - I agree that I like having these cards for different kinds of spend, however from a pure numbers game this is excessive.

As far as the arguments against listing of overdue payments, its really not that hard to meet your obligations. For credit cards this is just your minimum payment, and you would have to have not paid it by the time the next statement is issued.
Put simply, during this period Collections will be contacting you to remind the payment is due. If you cannot pay it you can request hardship assistance to extend your time, and you will not be reported for this payment.

If after all that contact you don't pay, can organisations really be blamed? Its really a two way street...

Agree with all that this will be a very interesting set of developments and the end result will also be interesting...

 

[Diesellife]

This is the premise of Diesellife's comment above, and forms the basis of current credit assessment procedures. Basic formula is total possible outstanding, divided by amount that could be requested (ie 2.5% of total balance as mmp). This is then factored into your living expenses compared to income.
The key issue with the current system, is that the above formula requires you to be honest for it to work - the new proposal will mean this information can actually be verified...

I agree, but I'm just stressing that a more comprehensive credit report will yield a better credit rating given the above issue.

A 0 balance 50k limit will yield a better score than a 50k balance on 50k limit. But that privilege will not exist if no balance can be recorded.