An industry association has warned that there’s “no chance in hell” the new comprehensive credit reporting (CCR) requirements would enable borrowers with a positive credit history to secure lower interest rates.
Executive chairman of the Finance Brokers Association of Australia (FBAA) Peter White has warned Treasurer Scott Morrison that the government’s draft legislation to ramp up comprehensive credit reporting (CCR) requirements could potentially leave borrowers worse off.
Mr Morrison said in a statement last week: “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.”
In response, the FBAA executive chairman said that there is “no chance in hell” this would happen.
Mr White believes that if the CCR changes are introduced, lenders would not provide rate reprieves for borrowers with a positive credit history, and these changes could punish borrowers that have experienced financial difficulties in the past.
“What will happen is that banks will maintain their current interest rate margins for customers with a better credit file, and increase the rates for those who have been through past difficulties under the guise of being of lesser quality or higher risk,” Mr White said.
“This normally impacts those who can least afford to pay higher interest rates, so it exacerbates their problems and helps no one.”
The FBAA head pointed to the negative impact experienced following the implementation of similar CCR changes in the United States, and he urged the Australian government to take caution.
“This is wrong, and we must be very cautious this doesn’t happen in Australia, as we will restrict access to debt for those who shouldn’t be restricted.
“Penalising people with higher interest rates is unfair and will lead to very poor consumer outcomes.”
The FBAA has called for the Australian parliament to reject CCR legislation and noted that it would make its views known to the Treasurer.
Following the tabling of the exposure draft legislation, Treasurer Morrison claimed that CCR changes were a “game changer” and would lead to “better deals on mortgages, personal loans and small businesses loans”.
The benefits of CCR were echoed by the head of broker and marketing at MoneyPlace, Matthew Santosa, who wrote in a blog for The Adviser: “[Once CCR] becomes mainstream, we’ll see the network effect in action where more borrowers will be able to get a better deal across more lenders. For some prospective borrowers, the extra data available to lenders under positive reporting increases their chance of being considered for a loan they would normally be knocked back for.”
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: CCR a ‘game changer’ for mortgages]
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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