How Australia compares to the UK’s credit reporting system

Globally, credit reporting is undergoing a significant shift, with countries like the UK and Australia adopting distinct governance models to manage consumer data and credit information.

As the Independent Chair of the UK's Credit Information, Interim Working Group, I’ve observed stark contrasts between the two nations’ approaches. Both face emerging challenges, such as integrating Buy Now, Pay Later schemes, and a push for greater consumer involvement in governance.

These differences in approach offer valuable insights into how each country navigates the complexities of credit reporting, laying the groundwork for a deeper understanding of their respective systems and the challenges they face.

Legislative engagement

One of the most noticeable distinctions between the two countries I've observed is the level of legislative engagement. In Australia, there is greater structure to the governance framework and the model is more formalised. This provides a clear, statutory foundation for the use of consumer data and the purposes for which it can be accessed. This is of course partly reflective of the different data protection frameworks in both countries.

In contrast, the UK has historically had a more informal governance structure around the use of consumer data for credit information, which is now being transformed into a more robust, self-regulatory organisation. In November 2022, the FCA published an interim report which found that whilst the credit information market was working well in a number of ways, there were also several areas where the market could be working better. Issues included significant differences in data between CRAs and that consumers lacked awareness of how to access and dispute credit information.

The use of credit information

Another key difference is how credit information is used. In Australia, the law restricts the use of credit data more tightly, limiting it to specific purposes. In the UK, there's more flexibility, with fewer bespoke restrictions on how credit information can be used.

Australia's prescriptive approach might seem limiting from a business perspective, but it puts consumer protection front and centre. It ensures that credit data is only used for its main purpose: to assess creditworthiness and make responsible lending decisions. This also delivers enhanced transparency to consumers and certainty for industry on how data may be used.

BNPL

Both Australia and the UK are also dealing with the rise of buy now, pay later (BNPL) schemes, and neither country has fully integrated these services into their credit reporting systems yet. Regulators in both nations are working to address this gap. It's a shared challenge, but one that both countries are tackling head-on.

This indicates that while BNPL is a new and innovative offering, it poses challenges for the credit reporting systems in both Australia and the UK. This is reflective of a wider point on how legacy credit reporting systems can evolve to reflect new/innovative products that don’t readily fit existing models. Only time will tell what the regulatory responses will be.

Consumer engagement

Interestingly, the UK is taking a more proactive approach in terms of consumer engagement within the governance process. The proposed credit reporting governance body in the UK will have consumer representation, including voting rights and seats on the board, as well as advisory committees. This contrasts with the more limited consumer involvement in the current Australian model.

These insights shed light on the nuanced and dynamic nature of the credit reporting industry, where policymakers and industry stakeholders must navigate a delicate balance between consumer protection, technological innovation, and regulatory oversight.

In both countries, the credit reporting industries must do their best to adapt to the changing needs and expectations of consumers, as well as leverage technology to enhance efficiency and accessibility. As credit reporting continues to evolve, both Australia and the UK have valuable lessons to learn from each other, shaping more consumer-friendly and resilient systems for the future.

Jackie Keogh is set to speak at Arca’s Credit Summit on Wednesday 13 - Friday 15 November at the RACV Royal Pines, Gold Coast.

About Jackie Keogh - Independent Chair of the Interim Working Group (IWG)

Jacqueline (Jackie) is the independent Chair of the Interim Working Group, an FCA and industry construct created to respond to the FCA market study on the Credit Information industry. The IWG is responsible for the issuance of a set of recommendations to design, implement and operate a new Credit Reporting Governance Body. Jackie is also a non-executive board member at UK Export Finance, the UK government’s export credit agency. 

Jackie leverages her 35+ years financial industry experience spanning government, regulator, banks, network provider and payment institution to provide trusted advice, challenge and direction. Her career has spanned NatWest Bank, SWIFT, Standard Chartered Bank, Lloyds Banking Group, Western Union and Financial Conduct Authority.