Scott Morrison mandates data sharing

Fintechs and customer-owned banks were quick to applaud Canberra’s move to introduce a mandatory comprehensive credit reporting regime from July 1 next year.

The new CCR regime will force the major lenders to share more detailed data about their customers with credit bureaus. 

When announcing the new regime on Thursday, Federal Treasurer Scott Morrison said government promised in May to mandate CCR if lenders - and in particular banks - are not reporting at least 40 per cent of their data by the end of the year.

Remarkably, less than one per cent of CCR data is currently being publicly shared.

While the big four banks have publicly committed to join the existing, and voluntary, CCR scheme in 2018, Morrison argued it was clear the banks would not meet the government’s timetable.

“These commitments have made clear that the end 2017 target will not be met and there is still uncertainty as to when all will be on board," he said in a speech.

Drive competition

"This is a significant announcement from the government, showing it really is serious about levelling the playing field and driving greater competition in Australia’s finance system," said Daniel Foggo, head of marketplace lender, Ratesetter Australia.

“We’ve seen from our experience in the UK how CCR gives consumers better pricing, greater convenience and helps build a more robust financial system," he added.

“It has been necessary for the government to step in for the benefit of consumers and small businesses, as the banks failed to participate on a voluntary basis, despite having over three years to do so."

Jason Yetton, chief executive of SocietyOne, also welcomed the news but said now it’s “time to get on with it.”

The peer-to-peer chief executive wants to see major banks, and the financial community generally, beat expectations and embrace CCR ahead of the legislative timetable.

Long time coming

Stuart Stoyan, FinTech Australia vice chair, and head of MoneyPlace, said the changes would level the playing field in favour of customers, by ensuring their positive credit history was front and centre when lending decisions were made.

“Although this reform has been a long time coming, today’s announcement is welcome news and follows the important and voluntary lead of a number of fintech lenders.

“We are also encouraged by the Treasurer’s desire to extend CCR to include telcos and utilities. This will help ensure Australia has a world class regime.”

Acting chief of the customer-owned banking lobby group, Dominic Dunn, also welcomed Morrison’s comment about starting CCR with the four banks.

In his view, other lenders are likely to follow suit quickly to improve their competitive position and their credit decision making.

Net benefits

“COBA’s position is that participation in CCR should be voluntary for smaller lenders because they have more of an incentive to participate than the largest lenders and should be able to do so according to their own priorities and resources.

The Financial System Inquiry found that the net benefits of participating will differ between different classes of credit provider.

"For a major institution with a relatively large customer base early participation may provide, at least initially, relatively larger benefits to smaller participants than for the institution itself," he said.

"But as participation and system-wide data grow, he said, net benefits increase for all CCR participants.”

The COBA chief again pushed the point that the banking market is an oligopoly and regulatory interventions must be designed to give the competitive fringe of smaller players every chance to take on the major banks.”

Talks ongoing

During his speech, Morrison said banks will be required to have 50 per cent of their credit data ready for reporting by 1 July 2018, increasing to 100 per cent a year later.

He confirmed that the timetable is achievable.

“We will consult further on whether to mandate additional institutions being included on a phased in basis as well as on the implementation mechanisms for this decision, including the legislation.

“There is still a lot more work to be done, but that work now is about implementing this decision, rather than making it.

"We have reached and passed this important threshold."

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