Rebecca Murray - Australian Retail Credit - Consumer education on credit reporting changes – a call to action

Consumer education on credit reporting changes

- a call to action.

Rebecca Murray

Head of Member Services & Consumer Affairs

21 May 2014

Informa Privacy Reform in Credit Reporting Forum

AGENDA

www.arca.asn.au

1. What do consumers need to know about the new credit

reporting reforms to optimise their personal situation?

2. What are the economic and social benefits which will

result from this consumer education?

3. What education resources exist for consumers?

4. What more needs to be done - and who should do it?

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1. What do consumers need to know

about the credit reporting reforms to

optimise their personal situation?

www.arca.asn.au

Consumers have greater privacy protections and controls for personal information under the new credit reporting system:

1. Getting a free credit report

2. Credit report must be accurate & up to date

3. Ban periods for identity theft

4. Dispute resolution

5. Hardship resolution

NEW CONSUMER PROTECTIONS

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1. Getting a free credit report

• Every Australian consumer has the right to get a free credit report from each credit reporting body (CRB) each year for free

• There are three major credit reporting bodies, Veda, Dun & Bradstreet, and Experian – and each one’s credit report about you will be different

• CRBs must make the free option equally as visible as the paid for, faster options. They may also offer other paid for services, like alerts for when someone accesses your credit report etc.

• It’s a lot easier than it used to be to find the free credit report options!

NEW CONSUMER PROTECTIONS

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2. Your credit report must be accurate and up to date

• The main reason for getting your free credit reports each year is to check that they are accurate and that you have not been the victim of identity theft

• Fixing incorrect listings is important, as errors may affect your ability to get credit in the future

• If you find an error, contact the CRB or CP – they must look into the issue and inform you of the outcome within 30 days.

• They can no longer ask you to go to someone else to fix it.

• If they cannot prove the listing is correct, they must change it

NEW CONSUMER PROTECTIONS

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3. Ban periods for identity theft

• Identity theft is often noticed when a consumer finds a debt on their credit report which is not theirs, or when a credit provider demands payment for this unknown debt

• If you suspect you are the victim of identity theft, you should:

• Call each CRB to ask them to put a ban in place

• Contact the local police as well

• The initial ban stays in place for 21 days, and can be extended if needed

• During the ban period, the CRB may not share your credit report with any credit provider unless you provide consent in writing.

NEW CONSUMER PROTECTIONS

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4. Dispute resolution

• If you believe there is an error on your credit report, you should first speak to the CRB or credit provider

• If you are not happy with the resolution, you can ask to speak to their internal dispute resolution (IDR) team. There is no charge for this process.

• If you are not happy with the IDR decision or how they handled your complaint, you have the right to approach your credit provider’s independent external dispute resolution (EDR) scheme. This is also free.

• You can also complain to the Office of the Australian Information Commissioner (OAIC) if you are still not happy.

.

NEW CONSUMER PROTECTIONS

www.arca.asn.au

Dispute resolution (cont’d)

These improved complaints processes are designed to make it easier for consumers to fix errors themselves….

… and to reduce their reliance on Credit Repair agencies – who charge to get errors fixed and purport to be able to remove “black marks” from credit report for a fee….

Correct listings can not be removed –

this new complaints process is for fixing errors.

NEW CONSUMER PROTECTIONS

www.arca.asn.au

5. Hardship assistance

• Allows consumers to request a credit provider to restructure their debts so they are more manageable during a time of financial hardship

• For example if you lose your job, your personal circumstances change significantly, or you become sick.

• Free financial counselling services also available

• This consumer right is not new – it exists under the National Consumer Protection Act 2009 – but is impacted by the CR Privacy Code changes.

NEW CONSUMER PROTECTIONS

www.arca.asn.au

5. Hardship assistance (cont’d)

• If you make a hardship request and it is:

• Refused - the default relating to your inability to

meet your payments at that time will not be

listed for 14 days.

• Granted - it will not be listed. However further

defaults may be listed at a later date.

NEW CONSUMER PROTECTIONS

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2. What are the economic and social

benefits that will result from this

consumer education?

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WIDER ACCESS TO & FAIRER DISTRIBUTION OF CREDIT ARE INDICATORS OF A BETTER FUNCTIONING LENDING SYSTEM, RESULTING FROM INCREASED INFORMATION SHARING

WORLD BANK AND BANK OF INTERNATIONAL SETTLEMENTS

BENEFITS OF MORE CREDIT INFORMATION SHARING

IMPACT: INCREASED ACCESS TO CREDIT

21.80%

35.50%

Caucasians Minorities

Women Men

Full-file system 47% 53%

Negative-file system 33% 67%

2. Shift in proportion of borrowers in Latin

America1

1Turner, M. & Varghese, R. Economic Impacts of Payment Reporting Participation in Latin America. Durham: PERC, 2007

Increased gender neutrality Reduced discrimination in lending

1. Increase in acceptance rates in the US1

Democratisation of Lending

1Hong Kong Monetary Authority,. (2014). Loans and Advances by Type. Hong Kong: Hong Kong Monetary Authority. 2 Turner, M. (2005). The Benefits of Comprehensive Credit Reporting Executive Summary. Presentation, Dun & Bradstreet Speaking Tour.

IMPACT: DECREASED FINANCIAL DISTRESS

0.00 10.00 20.00

2004

2002

Decrease in Write offs and Delinquencies in Hong Kong2

Write offs

Delinquency

2000000 2050000 2100000 2150000 2200000

2002 2004

HK

Do

llar

Years

Total Loans1

Decrease in write-offs and

delinquencies despite increase

in overall debt levels

Conclusion: More information

increases the availability of

credit without causing financial

distress

A reduction in intolerable debt

SUMMARY OF IMPACTS

Increased availability of credit

Decrease in

financial distress

Decrease in cost of borrowing

Impacts

Increase in acceptance

Democratisation of

lending

Increase in home and

asset ownership

More tolerable debt in

contrast to intolerable

debt

Increase in bank

competition

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3. What educational resources exist

for consumers and who is providing

them?

ARCA CONSUMER RESEARCH

Consumers tell us they need to know more about credit reporting

59% 9/10

74%

59% of all consumers tested had not heard of the term ‘credit reporting’.

74% of all consumers tested considered credit reporting to be important

9/10 of consumers tested considered it important to know about changes to credit reporting

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CONSUMER EDUCATION EFFORTS

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CONSUMER EDUCATION EFFORTS

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• Unfortunately, the regulators have not been able to fund much consumer education.

• The OAIC requested ARCA to help.

• As a result, ARCA members agreed to fund a consumer website and media relations campaign.

• www.CreditSmart.org.au is now the central source of truth for consumers

• 24,000 unique visitors since launch

• Linked to by over 50 organisations including ASIC MoneySmart, OAIC, various consumer advocates sites etc

• Supported by over 100 articles in the media (many kindly noting the url…)

• Increasingly being also used by advisers

…but we are just scratching the surface!

Media highlights Herald Sun, 28 March 2014

ABC The Business, 12 March 2014

Australian Financial Review, 12 March 2014

Money Magazine, March 2014

Australian Financial Review, 30 January 2014, p23

Australian Banking & Finance, March 2014

CONSUMER EDUCATION EFFORTS

www.arca.asn.au

Government/regulators

ASIC

• MoneySmart Week planned to include reference to credit

reporting changes and CreditSmart on Monday

• Informative page on MoneySmart site (linking to

CreditSmart)

OAIC:

• Website and fact sheets (linking to CreditSmart)

• Privacy Week activities (including declaration of

Wednesday as CreditSmart Day)

CONSUMER EDUCATION EFFORTS

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ARCA

• Ongoing media work, in conjunction with Members

• Industry education continues – watch this space

• Intermediary program

• Encouraging Australian research on role of comprehensive

credit reporting in reducing financial exclusion

• CreditSmart.org.au upgrades – videos, content, SEO

• Creating content to support the consumer education work

of financial literacy organisations

Financial Counsellors/Consumer Advocates

• Educating counsellors

• Supporting consumers

• Advocating for improvements to the system

CONSUMER EDUCATION EFFORTS

www.arca.asn.au

Consumer literacy organisations

• Over 50 organisations have already linked to

CreditSmart.org.au

• Many more will soon do so, including CBA Foundation’s

StartSmart school program

• We will be talking to these organisations to see what they

need and how to best help them integrate content on being

credit worthy into their programs

www.arca.asn.au

4. What more needs to be done - and

who should do it?

Panel Discussion