Denham Sadler
June 6, 2018

Credit law delay angers FinTechs

Fintech

Credit law delay angers FinTechs

Stuck in traffic: FinTechs antsy for new credit reporting laws to pass parliament

The FinTech industry body has criticised the government and consumer groups over delays to new comprehensive credit reporting laws, with the legislation now remaining in the lower house for three months.

It comes as a senate committee gave a tick of approval to the bill, despite a number of concerns surrounding its potential impact on vulnerable and disadvantaged Australians.

Treasurer Scott Morrison announced in November last year that the government would be legislating a mandatory comprehensive credit reporting regime, requiring all banks to provide credit information and active consumer credit accounts to eligible reporting bodies.

Under the scheme, banks would have to provide “positive” credit data, including how many accounts have been opened, credit limits and monthly payments, in order to give a “more balanced reflection of credit history”.

The legislation was released for public consultation in February this year. Under the bill, banks would have to have 50 per cent of credit data ready to be reported by September this year, with all data available a year after that.

But a number of concerns have been raised by consumer groups along with pushback from the banks, and the legislation has remained in the lower house since it was introduced in March.

This is much to the chagrin of FinTech Australia, with the new credit data providing a wealth of opportunities for local FinTech companies.

“We are disappointed that there appears to be another delay in securing the passage of the comprehensive credit reporting legislation. It is ironic that this legislation is being derailed and delayed by some consumer advocates, when consumers will be the overall beneficiary,” FinTech Australia chief executive Brad Kitschke said.

“Access to credit, and an obligation by lenders and providers of credit to consider all the relevant information about a person’s ability to meet the obligations of a loan or line of credit should be seen as a good outcome in light of some of the poor practices being uncovered.”

In a joint submission to government, a number of consumer and legal bodies said the bill could “lead to a number of unintended negative consequences and significant problems for consumers”.

These concerns centre on the impact the release of this credit data would have on vulnerable and lower income Australians, potentially leading to increased price differentiations, the use of ‘credit cleaning’ services and the use of pre-screening for marketing purposes.

“We are concerned that some lenders are likely to use this increased information not to deny people credit where it appears their finances are already stretched, but to charge those customers more for credit,” the submission said.

“We may see a significant increase in price discrimination including an influx of expensive, priced-for-risk products.”

The groups are most concerned about the inclusion of repayment history information in the scheme and argue that this should be excluded until a recently announced government inquiry into the rules is completed.

But this was slammed by FinTech Australia, with Mr Kitschke saying it would undermine the whole scheme.

“We are sympathetic to the views of consumer advocates who don’t want access to credit to be unfair or restricted based on historical information that may not be relevant or where it is not considered properly," he said.

"However, it seems nonsensical that some consumer advocates are asking for categories of information to be removed from the requirements that would weaken the rules."

“Rather than suffer yet another delay, or take another year to rehash the same issues, it would simply be appropriate for those consumer advocates to offer solutions that would enable the passage of the bill.

"It’s not good enough to simply throw stones and highlight problems at this late stage. It is time for all relevant stakeholders to double down and secure passage of this important legislation.”

Mr Morrison said the legislation was a “game-changer” for consumers and lenders, but it has now been left in the lower house for three months.

A senate committee report on the legislation handed down its report on Monday evening, with the government-led group recommending the bill be passed as is.

“Australians have been waiting for comprehensive credit reporting for a long time," the report said.

"The committee considers the reforms in the bill to be an important and essential next step in transforming Australia’s current negative and assumption-based credit reporting system into one that provides for a holistic, accurate and comprehensive view of consumers’ credit standing."

In additional comments on the bill, the Labor senators provided support for the legislation, but argued repayment history information should be excluded until July next year.

“Labor senators are cautiously supportive of the measures set out in this bill but will take a very careful look at both the government's approach to regulating the use of consumer financial data and whether any benefits of mandatory comprehensive credit reporting will flow through to consumers,” the report said.

“Labor senators remain supportive of the fintech sector and its ability to increase competition and consumer satisfaction within the financial sector.

"Notwithstanding this support, given the New Zealand experience and the current competitive environment in Australia, Labor senators remain sceptical that consumers stand to gain much at all.”

There are concerns that the credit reporting bill will follow in the footsteps of the government’s “game-changing” equity crowdfunding reforms, which were introduced to Parliament in September last year but are still yet to be passed, despite having bipartisan support.

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