Mandatory participation likely as CCR remains stalled

  • By Andrew Starke

Australia’s financial institutions are unlikely to meet the Productivity Commission’s recommended cut-off of 30 June for a “critical mass” of the nation’s retail credit accounts to be captured under Comprehensive Credit Reporting (CCR).

The Productivity Commission’s final report on data availability and use, released earlier this month, reaffirmed the benefits of CCR and recommended that Treasury proceed with more forceful measures if the industry continues to drag its feet.

“A voluntary approach to data input should continue to be pursued, unless it is clear that a critical mass of accounts is not achievable on that basis,” the report states. “In the event that voluntary participation in the scheme remains below a critical mass of 40 per cent in mid-2017, the Australian Treasury should proceed with developing draft legislation to mandate comprehensive credit reporting.”

Specifically, Recommendation 5.5 states that the Australian Government should adopt a minimum target for voluntary participation in Comprehensive Credit Reporting of 40 per cent of all active credit accounts, provided by Australian Securities and Investments Commission (ASIC) licensed credit providers, for which comprehensive data is supplied to the credit bureaux in public mode.

“If this target is not achieved by 30 June 2017, the Government should circulate draft legislation by 31 December 2017, to impose mandatory participation in Comprehensive Credit Reporting (including the reporting of repayment history) by ASIC licensed credit providers in 2018.”

'Substantial notice period'

Suzanne Steele, managing director of Experian Australia/NZ, said the Commission’s recommended short timeline (June 2017) for a critical mass of voluntary participation would undoubtedly give further impetus to the sharing of more comprehensive information in the current system which predominantly focuses on the sharing of negative data.

“The positive consumer insights to be obtained by reviewing personal information such as a person’s credit track record are widely recognised in the market,” she said. “In our experience from operating bureaus in almost 20 other countries, positive data sharing is also a fairer system that could provide more Australians with better credit opportunities and lenders with more support for their responsible lending practices.”

The consensus is that participation by at least 40 per cent of account holders is required before critical mass is achieved and the full benefits of CCR start to accrue. However, none of the major banks are currently sharing CCR data publicly although NAB has long signalled it will participate.

This was a point made by the Productivity Commission which acknowledged in its report that the competitive advantage of a major institution could be diluted by signing up for early and full participation in CCR. However, the big four have had plenty of time to get used to the idea with David Murray’s Financial System Inquiry of late 2014 recommending that government conduct a review of CCR by late 2017, to determine whether the regime should become mandatory, rather than voluntary.

“We note this (end of June) is a date almost upon us, but those who have argued for more time could do their case greater service by noting that the industry has had since December 2015 to show clear movement, and a substantial notice period of CCR’s imminence prior to that,” states the final report.

“Greater movement, if it occurs by December 2017, may convince the government to hold off proceeding to parliament. But the preparation of legislation to make participation mandatory cannot be a shock after such a time; and those with subsidiaries in New Zealand must surely have gained relevant experience in CCR participation from there.”