Rebecca Murray - Australian Retail Credit - Consumer education on credit reporting changes – a...
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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?
www.arca.asn.au
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
www.arca.asn.au
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
www.arca.asn.au
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
www.arca.asn.au
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
www.arca.asn.au
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
www.arca.asn.au
2. What are the economic and social
benefits that will result from this
consumer education?
www.arca.asn.au
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
www.arca.asn.au
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
www.arca.asn.au
CONSUMER EDUCATION EFFORTS
www.arca.asn.au
CONSUMER EDUCATION EFFORTS
www.arca.asn.au
• 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
www.arca.asn.au
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