Pay-day loan companies and other non-bank lenders will be added to Australia’s data portability scheme under the federal government’s plan to expand the Consumer Data Right across the finance system.
Digital Economy minister Jane Hume in January flagged ‘Open Finance’ as the next sector to be designated under Australia’s Consumer Data Right (CDR). Open Finance will eventually also include merchant acquiring services, general insurance and superannuation.
But lenders without a banking licence are being prioritised to complement the existing CDR Open Banking scheme, with a formal consultation process opening on Tuesday.
“Industry and stakeholder consultation at every step of the way is an important feature of our pathway to an economy-wide application of CDR. It not only supports practical implementation and explores benefits, it also ensures we build a high-value and robust data access system together,” Senator Hume said in a statement on Tuesday. .
Non-bank personal loans – including payday lending and cash advance providers, are being considered for inclusion, as are non-bank credit cards, home loans, consumer leases, margin loans and business financing. Separate consultations will be held for merchant acquiring services, general insurance and superannuation.
Lead agency Treasury is conducting the public consultations and is also required to consult consumer and privacy regulators about a sector before it can be added to the CDR scheme. Open Finance would join the original banking sector as well as energy and telecommunications in designation.
A consultation paper was released for Open Finance on Tuesday, with stakeholders given less than a month to respond to the first focus area – non-bank lending.
Non-bank lending has been identified by Treasury as a priority because of its potential to round out consumers’ view of their borrowing and liabilities already generated by open banking.
It could also “facilitate comparison of the full suite of lending products on the market, spurring more competitive and personalised products and services across both the banking and non-bank lending sectors”, according to the new paper.
“Combining Open Finance with banking datasets already in the CDR could support the creation of new and innovative services such as personal finance and life administration apps to take the time, cost and complexity out of everyday tasks and make big financial decisions less risky for consumers,” the paper said.
“Banking and non-bank lending data can be used for financial planning and loan assessment purposes, and an even richer picture of someone’s financial circumstances can be revealed when banking data is combined with superannuation and insurance data.”
The paper asks for feedback on which non-bank lending data holders should be included noting other CDR sectors have excused smaller companies where compliance would be too onerous.
It proposes using the corporate regulator’s definition of a “credit facility” or any entity that is engaged in the provision of finance in the course of carrying on business in Australia to determine which non-bank lenders should be considered data holders, with exceptions to then be carved out.
In terms of data sets, it appears the non-bank lending sector will closely follow the banking sector, with product data, customer and account data, as well as transaction and billing data proposed for inclusion.
The paper also asks for responses to specific questions on benefits and use cases, privacy and intellectual property considerations and regulatory burden but notes these will also be informed by experiences in open banking.
In the UK, where open banking is more advanced, payday lenders use the scheme to conduct checks on applicants to determine eligibility and suitability, speeding up approvals to the same day.
Do you know more? Contact James Riley via Email.