Part 2 - The Privacy Act 1988 and credit reporting
In our first of three (3) part blog on the amendments to the Privacy Act 1988 (Privacy Act) we focused on the new Australian Privacy Principles (APP) that commence on 12 March 2014 and the changes businesses will need to implement in order to comply with their obligations under the Privacy Act.
In part two (2) of our blog we review the new credit reporting laws under the Privacy Act and the personal information the public can expect to be collected by credit agencies in relation to their credit histories.
Current credit reporting laws
The current credit reporting system in Australia has been described as a `negative' reporting system which involved the reporting of ‘negative’ information (information that detracts from an individual’s credit worthiness, such as the fact that he or she has defaulted on a loan). The main types of personal information collected and used under the current system relates to information about:
- a credit provider having sought a credit report regarding an individual in connection with an application for credit, and the amount of credit sought in the application
- an individual's current credit providers
- any credit defaults; and
- a credit provider's opinion that the individual has committed a serious credit infringement.
Some criticism was levelled at the current crediting system because no ‘positive’ information about an individual’s credit position was ever collected or used. Positive information relates to a person’s current credit commitments. An example of information in this category is a record of an individual having made a loan repayment.
Changes to credit reporting laws
The new amendments to the Privacy Act have revised credit reporting provisions so that they consistent, simple and easy to understand. The new provisions are based on the flows of personal information in the credit reporting system and also address the interaction of the provisions with the APPs where relevant.
The new changes to the Privacy Act allow for both negative and positive information and include:
- the introduction of more comprehensive credit reporting, which will allow the reporting of information about an individual’s current credit commitments and their repayment history information over the previous two years;
- a simplified and enhanced correction and complaints process;
- a prohibition on the reporting of credit related information about children;
- a prohibition on the reporting of defaults of less than $150;
- the introduction of specific rules to deal with pre-screening of credit offers;
- the introduction of specific provisions that allow an individual to freeze access to their credit related personal information in cases of suspected identity theft or fraud; and
- the introduction of civil penalties for breaches of certain credit reporting provisions.
The five new kinds of personal information (also known in the industry as `data sets') that are able to be collected and used are:
- the date the credit account was opened;
- the type of credit account opened;
- the date the credit account was closed;
- the current limit of each open credit account; and
- repayment performance history about the individual.
Effect of new credit reporting laws
The Government intends, by enhancing the credit reporting system, to allow credit providers to make a more robust assessment of credit risks and assist credit providers to meet their responsible lending obligations. It is expected that this will lead to decreased levels of over-indebtedness and lower credit default rates as well as improved competition and efficiency in the credit market, which will hopefully result in reductions to the cost of credit for individuals.
In addition, the new credit reporting provisions will provide further consumer protections by enhancing obligations and processes dealing with notification, data quality, access and correction, and complaints. This includes measures to place greater responsibility on credit reporting bodies and credit providers to assist individuals to access, correct and resolve complaints about their personal information.
Other measures that will benefit individuals include the introduction of specific rules to deal with pre-screening of credit offers and the freezing of access to an individual's personal information in cases of suspected identity theft or fraud.
For further information on the new credit reporting laws please contact us.Back