CCR a ‘game changer’ for mortgages

CCR a ‘game changer’ for mortgages

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The draft legislation for mandatory comprehensive credit reporting has been released, with the Treasurer saying that it could result in “better deals” on loans.

The new legislation will enable lenders to access both positive and negative credit reports — and therefore price loans accordingly.

The bill aims to address the “information asymmetry” that currently gives consumers more access to their credit risk than the credit provider. The government has said that this can therefore result in “mis-pricing and mis-allocation of credit”.

Mr Morrison said that positive CCR would lead to “better deals on mortgages, personal loans and small businesses loans”.

CCR background

The mandatory regime will require the major banks (those with more than $100 billion in total resident assets) and their subsidiaries to supply 50 per cent of their comprehensive credit reporting data (information on active and open credit accounts) to credit reporting bodies by 1 July 2018, increasing to 100 per cent by July 2019.

The banks would then be liable to keeping the information supplied accurate and up to date, including by supplying information on accounts that have been subsequently opened.

ASIC may seek a civil penalty where an eligible bank fails to supply credit information as required under the mandatory regime, or if a credit reporting body does not disclose information that it has received under the mandatory regime.

The maximum penalty for a body corporate failing to supply credit information will be $2.1 million.

The draft legislation will include the power to extend the mandate to include other credit providers in the future, if needed.

Credit reporting bodies will also have a new obligation placed on them as to where consumer credit data can be stored.

A “game changer for consumers”

Speaking after the release of the exposure draft legislation on Thursday (8 February), Treasurer Scott Morrison said that the legislation formed part of the government’s commitment to deliver “a better deal for bank customers” and is a “game changer for consumers”.

The Treasurer said: “Customers with good credit histories will be able to obtain lower rates, and be better placed to shop around because their credit history will now become available to all lenders. Others, whose previous credit histories only included default rates, will also get a better chance to demonstrate their credit worthiness because there will be more credit information available on their reliability.”

Mr Morrison added that the CCR will also benefit small business owners, who should gain “better and faster access to credit allowing them to invest more into growing their businesses, employing more workers and paying them more”.

“The new credit reporting rules will help open up the lending market to competition by allowing new lenders entering the market to better assess credit risk, meet responsible lending obligations and at the same time reduce exposure to defaults,” Mr Morrison said.

“This is good news for customers because it means that new entrants, including innovative fintech firms, will be able to use comprehensive credit reporting information — removing a significant barrier to entry that currently exists in the system.”

The Treasurer added that while the CCR will not extend beyond the major banks in the near future, there are “strong commercial incentives” that will encourage other lenders to participate in supplying and consuming comprehensive credit reporting data, once the major banks participate.

The exposure draft of the legislation is available on the Treasury website and submissions on the law will be accepted until 23 February 2018.

[Related: Why positive credit reporting is such a big deal for our industry]

CCR a ‘game changer’ for mortgages
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Annie Kane

Annie Kane

Annie Kane is the editor of The Adviser magazine, Australia’s leading magazine for mortgage brokers. As well as writing news and features on the Australian mortgage market, financial regulation, fintechs and the wider lending market – Annie is also the host of the Elite Broker podcast and regulator contributor to the Mortgage Business Uncut podcast. 

Before joining The Adviser team at Momentum Media in 2016, Annie wrote for a range of business and consumer titles, including The Guardian (Australia), BBC Music Magazine, Elle (Australia), BBC Countryfile, BBC Homes & Antiques, and Resource magazine.

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