Arca calls for urgent reforms to modernise Australia's credit reporting system

While the Final Report of the Review of Australia’s Credit Reporting System recognises the need to modernise, more work needs to be done as a priority, and some reforms need to be rethought.

Media release, 29 November 2024: Arca, the peak industry association focussed on the use of credit reporting and consumer data, is urging the Government to promptly continue work on reforms to modernise Australia’s credit reporting system.

The need for modernisation was recognised in the Final Report from the Review of Australia’s Credit Reporting Framework, released by Government yesterday and containing the findings of an independent review into Australia’s credit reporting system.

“We note that the Review has acknowledged the need for modernisation of credit reporting, including by increasing the data available and improving consumer outcomes, such as through simpler access to data and improved corrections processes,” said Elsa Markula, CEO of Arca.

“However, the Review’s report contains some fundamental misunderstandings about how the credit reporting system works. Several recommendations would, if implemented, have exactly the opposite effect of the outcomes the Review was intending to achieve.”

For this reason, the industry body welcomes the Government’s commitment to further consultation before finalising a reform agenda. It stresses the need for this work to occur as a priority.

“As Australia’s credit reporting system is behind much of the developed world, we know there is plenty to be gained from quickly implementing reforms which allow the credit reporting system to better support both lenders and consumers,” said Richard McMahon, General Manager, Government and Regulatory at Arca.

“The Review of Australia’s credit reporting framework occurred within just six months. This limited timeframe appears to have affected the Review’s ability to consider all the issues and some of the recommendations proposed.”

For example, while the Review proposes a more flexible regulatory framework, some of the changes proposed – such as the removal of the Privacy (Credit Reporting) Code (‘CR Code’) – would make it significantly more difficult for the framework to be updated over time.

The CR Code provides detailed guidance and details on businesses’ legal obligations and is developed by Arca for approval by the Office of the Australian Information Commissioner (OAIC), which is the final decision maker about whether updates are needed and in what form they should occur.

“The CR Code has been one of the most effective parts of the legal framework,” said Ms Markula. “It has been updated several times to resolve legal uncertainties and reflect market developments. The collaborative approach between industry and the regulator ensures flexibility and responsiveness, without the need for updates to Regulations which have simply not been forthcoming in the past. We strongly believe the CR Code should remain a cornerstone of the system.”

Some of the solutions proposed would also involve significant delays to solving current problems. For example, the Review proposed a ‘soft enquiries’ framework: clear rules about when a lender could access some information to offer an individual a price quote without any effect on their credit report. While the Review proposed these rules be within the Privacy Act; Arca previously developed a version that could be implemented through the CR Code much more quickly.

 “A clear, consistent soft enquiries framework would benefit consumers – allowing more shopping around without affecting credit reports – while also giving industry more certainty about their obligations, and, potentially better-quality data,” said Mr McMahon. The current issues around soft enquiries need a quick resolution; the path proposed by the Review is not the best way forward.”