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Big black mark for new credit reporting rules

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Illustration: Karl Hilzinger

Hey. Your last credit card bill. Do you remember when you paid it? Did you check the date it was due? Or did you just pay it when you had the spare cash?

And the one before that, say, the one that was due in December when you were busy spending and not paying bills?

Okay, final question. What about the credit card bill you received in January last year. You know you were busy trying to reshuffle your finances after the mayhem of Christmas and New Year - but did you pay that bill on time?

I only ask because from next month any time you are five days late on a bill from a licensed credit provider, that late payment will go as a little mark into your credit history file. A little black mark.

Every. Single. Time.

This new legislation sits in the Privacy Act (loosely named, really, since we don't have any). From March there will be extensive changes to the credit reporting rules in that act and there will also be an accompanying code of practice, drawn up by the Australian Retail Credit Association.

The association drafted the code but it will not be responsible for it. That's the job of the regulator, the Office of the Australian Information Commissioner. Of course, both bodies called for submissions and consultations. And, of course, they ignored the majority of the input of consumer advocates with decades of experience.

Credit card payments. Mortgage payments. Car loans. Personal loans. If you have a loan from a bank or mutual bank - or any other providers licensed to give you money - and you are just five days late, it will go straight to your repayment history. That history will be available for any lender to check out if you ever need money again.

These dramatic changes are taking place and no one is telling us about them. There are no advertising campaigns. There is no education process. Just a daggy little website called Credit Smart run by ARCA, the peak body for those same lenders that will be running surveillance on your records. The animations. The script. Cringeworthy.

When did ARCA launch the website? The press release says late January.

What's worse is that the scheme is retrospective. So it's not as if you can decide to be meticulous from this very moment. Nope. From December 2012, if you were late it can be uploaded to your file.

Nor do the banks or mutuals have to make a song and dance about it. Nope. They can just send you one of those bland terms and conditions emails or letters and you will not even recognise that you are about to be watched with an auditor's eye.

The way it's been promoted by some is that this will mean those of us who pay on time will be able to get discounts.

But Kat Lane, the experienced consumer credit advocate at the Consumer Credit Legal Centre NSW, said that overseas experience reveals punctual payers may not get benefits. Instead, the information will be used to target those who pay late. You can imagine, can't you? There are lenders who will go after vulnerable consumers and charge them accordingly.

Lane said consumers would certainly be able to use external dispute resolution if they want to challenge what is held on their files - but that may take months. The Financial Services Ombudsman is already a very busy agency.

The fact is, this is all about the convenience and protection of lenders and not about the safety and security of consumers.

Last year, the Australian Retail Credit Association conducted a survey on what Australians thought about credit reporting. Not much - in fact 60 per cent of us had no idea what that term meant. And those of us who did know something, thought of credit reporting as negative.

Damian Paull is CEO of ARCA, which is charged with educating people on these changes. I asked him if he'd ever paid a bill late.

He said: "I'm far more conscious now of tracking when my bills are due … my behaviour has changed and my consciousness has changed since I've become more aware."

Which is lucky for him, with plenty of notice and a wealth of understanding from years in the industry.

The rest of us aren't so lucky. And it won't be long before utilities bills join home loans and credit card payments. I fear it will be telco bills. Telcos argued hard for repayment history.

And I predict our - so far - safe and successful lending system will be riddled with the damage done to people persecuted by lenders with no hearts and no discernment, just their little black credit records.

Twitter @jennaprice or email jenna_p@bigpond.net.au

23 comments so far

  • Utter tosh, Jenna. I'm not wealthy nor do I have a financial education but I have enough knowledge that I am responsible for paying my debts when they are due. It's about time we transferred the onus of responsibility away from those who are owed a debt to those who incur it. If you don't have the money, then don't buy it on credit. Emergencies, ie a life or death situation, sure but day-to-day stuff? Nup.

    Commenter
    Faj
    Date and time
    February 11, 2014, 12:15PM
    • Totally agree. Reading the story it's as if the author thinks credit agencies are charities that are supposed to go around spreading wealth and goodwill. They're not - they're businesses that are supposed to make money and they do that by giving consumers credit and charging them interest. When the debt isn't paid on time, the credit provider incurs costs. It's perfectly reasonable that they should want to know who the serial late payers are so they can either charge a premium for offering credit or refuse credit to people who have a history of being late on payments.
      Creditors make money by lending money, so they're not going to go out of their way to turn down your business just because you had a late payment once at Christmas - the purpose of this system is to help creditors protect themselves from the people who are regularly late on payments and I think that's perfectly reasonable.

      Commenter
      CaseThree
      Date and time
      February 11, 2014, 12:55PM
    • It's not "tosh" and it is not just about credit. Sometimes bills get misplaced or payment delayed for a range of innocuous reasons yet it could still count against you. Or would you recommend people pay electricity bills and the like in advance? Maybe you are perfect and always pay everything on time, but 99% of us aren't.

      Commenter
      Red Fred
      Date and time
      February 11, 2014, 1:20PM
    • I do agree that there needs to be more public education around credit reporting, both in general and the new system. The new system isn't all doom and gloom however.
      Most lenders are currently reasonably understanding if you've missed a Telstra bill or similar and this will be carried over to their assessment in the future. The people who need to be worried about this are those who are consistently late on their bills. Let's face it, would you want to lend money to someone who never pays their bills on time?
      The good news for consumers is that those who do pay all their commitments on time will be seen as lower risk. These people will be seen as more valuable customers by the banks and thus will have more negotiating power when it comes to loans and other credit related services.
      If you're doing the wrong thing, the new credit reporting won't be very good for you. If you do the right thing there will be benefit to be enjoyed.

      Commenter
      Sage Lending Solutions
      Date and time
      February 11, 2014, 2:52PM
    • Faj, Case Three. Spot on. Not paying bills on time costs the creditor money which costs all of us. Not paying your bills on time is bludging on the rest of the community. Unfortunately that is all too commonplace now and the author if this article is just encouraging this. How would she feel if she lent money to someone and that person did not bother to make a repayment in time? Or if her employer did not pay her on payday? Or, if she is freelancing, the publishers did not pay her?

      Commenter
      MFL
      Date and time
      February 11, 2014, 3:16PM
    • Totally agree. We like to view companies as big and evil greedy corporates that are out for our money, so being late with bills is totally fine. How would late bill payers like it if they were in business and had to constantly chase up slackers who couldn't be bothered paying for services delivered weeks or months ago? I bet their view would change rapidly.

      Commenter
      Michael
      Date and time
      February 11, 2014, 4:03PM
  • I often pay my bills EARLY. Bet that little fact doesn't make it into my credit history (except with the ATO, because they have to pay me interest, before taxing me on that interest, but that's another whinge).

    Commenter
    Kevin
    Location
    (not THAT Kevin)
    Date and time
    February 11, 2014, 12:34PM
    • With a few exceptions my bills get automatically paid by credit card - saves having to remember when they are due

      Commenter
      MST
      Date and time
      February 11, 2014, 12:44PM
      • No credit provider is going to deny you future credit because you were once 5 days late with a bill. It is simply not in their business's interests to do so.

        Commenter
        SF
        Location
        Canberra
        Date and time
        February 11, 2014, 12:55PM
        • Correct SF - if everyone is 5 days late paying their bills and are denied credit or loans very few banks would be posting billions in profit annually - so I'd say lets boycot the credit providers and all pay exactly 5 days late in the future - easy.

          Commenter
          Maxedcredit
          Location
          Canberra
          Date and time
          February 11, 2014, 3:28PM

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