Reforms to the Privacy Act, 1988 came into effect on 12 March, 2014, drastically changing credit reporting in Australia.

The Privacy Act protects your personal and credit information; what information is collected, how it is used and who has access to it. When you apply for credit you usually give permission to share this information with credit reporting bodies. The information is used by credit providers to help make lending decisions.

Australia currently operates on a negative credit reporting system. Only negative information such as defaults, bankruptcies and court judgements can be listed on your credit record. This information may be used by credit providers to deny a borrower access to finance.

Australian Banks that lobbied for the new changes have argued that the Banks currently lack information on how many other accounts their customers have and what credit limits are attached to them. The Banks say this poses a risk for lenders because they do not get to see the full picture of a person’s credit history and do not always know if customers are overcommitted.

The new amendments will allow a much more comprehensive credit reporting regime including allowing lenders to share information about your credit repayment history. It is a change to a positive credit reporting system.

A summary of the changes –

Before 12 March, 2014:

1. A “default” is listed on your credit file for late payments of 60 days or more and on amounts you owe over $100.00. This stays on your credit history for a period of five years.
2. Your repayment history was not listed.
3. Opening and closing dates of accounts were not listed.
4. Account limits (e.g. on credit cards) were not listed.

After 12 March, 2014 –

1. A “default” is listed on your credit file for late payments of 60 days or more and for amounts you owe over $150.00. This stays on your credit history for five years.
2. Your repayment history is reported when you are 5 days or more late in paying. This stays on your credit history for two years.
3. Opening and closing dates of accounts are listed.
4. Account limits (e.g. on credit cards) are now listed.

What this means for you as a borrower

The changes could positively or negatively impact upon you depending on how you manage your credit.

Possible disadvantages of comprehensive credit reporting

Because credit providers may share more credit information amongst themselves, you may not receive credit approval for a loan because of your credit repayment history causing a lender to believe that you are a greater risk, whereas before these changes came into effect your credit history was not as comprehensive.

Missed payments and late payments made just 5 days after the due date will now show on your record, not just defaults and other serious credit infringements. This can affect future credit applications, or could result in higher interest rates on loans for borrowers with a poor credit history. However, payments for gas, electricity, water and telephone bills will not be recorded under the new system.

The Commonwealth Attorney-General, Mr George Brandis, QC, announced on 14 March, 2014 that the Federal Government will review the new laws, especially the fact that late payments reported on your credit record have been reduced from 60 days to 5 days.

In the meantime, it is now more important than ever to obtain legal and financial advice when you default in respect of a loan or line of credit. To find out more about your legal rights in relation to challenging your credit record, contact Brazel Moore Lawyers on (02) 4324 7699 to speak to an experienced Solicitor today.