CREDIT REPORTING

Page last updated on 01/06/2020

More information

What has not changed?


  • If your client is unsure about what debts have been listed ask your client to get a free copy of their credit report (usually the best first step is Equifax as it has the most listings)
  • You need to specifically consider the effect on your client’s credit report when you are negotiating and settling financial hardship or raising any dispute
  • Seek instructions from your client about whether they have any concerns about their credit report. Some clients see a credit report as a direct reflection of their standing. Clients should be reminded that credit reports only matter when they are trying to access credit (and even then, the ability to repay and their savings are more important).
  • Always check that the lender complied with the credit reporting laws (Privacy Act and Credit Reporting Code) if a listing has been made
  • Repayment History Information can only be listed by lenders licensed under the National Consumer Credit Protection Act




What do the changes mean?


The changes announced to how repayment history information will be recorded for borrowers with loan deferrals only apply to banks that are members of the Australian Banking Association. It is still unclear what the approach of other lenders will be.




Repayment History Information (RHI) and banks (that are members of the Australian Banking Association).


For up to date customers at the time a deferral is granted

Banks will mark any negotiated deferral as if repayments were continuing to be made. This means that the payment would show as “0” and that the loan was in order. This would not affect a person’s credit score.

For customers in arrears at the time of the request for a deferral (which is granted)

Banks will not record any RHI for the period of the payment deferral. After the deferral period, the banks will determine how to record RHI.

Note: If other lenders looked at this pattern on the credit report, they would likely interpret it as indicating the person was not paying and was experiencing financial hardship. In other words, this may act as a type of hardship flag.




RHI and other licensed credit providers and mutual banks


For other lenders, such as finance companies and mutual banks, it is unknown how they will approach RHI. It will be necessary to ask them and then negotiate. Some lenders may not be recording RHI at all.




Defaults (banks, other lenders, utilities, telcos)


Lenders/service providers may be somewhat reluctant to list defaults - an acknowledgment that the pandemic is arguably not a reflection of credit worthiness. However, it is recommended that you do not assume this will be the approach.




What do you do differently?


You are unlikely to do anything differently. It is recommended you consider doing the following:

  • Make sure your client knows that a default may be listed if there is a default, no repayment arrangement has been agreed and default notices have been issued.
  • The best strategy to prevent negative listings is an agreed repayment arrangement.
  • Always ask about the lender’s approach to RHI and defaults during the pandemic.
  • Negotiate and ask for negative listings not to be made during the pandemic. Ask for RHI to be marked as paid if a repayment arrangement has been agreed.
  • If the listing is incorrect or the appropriate procedure has not been followed, do raise a dispute and consider a complaint in AFCA.
  • Always include credit reporting in settlement negotiations.




Resources


Australian Banking Association: Support during COVID-19 – The Personal Relief Package

Australian Retail Credit Assoication, creditsmart.org.au - Covid-19 payment pause - what does it mean for your credit report?





Disclaimer: The information on this website is for financial counsellors only. It is general information only. Financial counsellors must still tailor advice to their client’s individual circumstances. 

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FCA sincerely thanks Kat Lane. Liz Minter and Melinda Rene for their outstanding work in putting this site together.