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SME lender calls for CCR to apply to businesses

by Reporter6 minute read
comprehensive credit reporting, business data

The CEO of small business lender OnDeck has said that he hopes comprehensive credit reporting could be extended to cover businesses as well as active consumer accounts.

The fintech lender, which entered the Australian SME finance market in April 2015, told The Adviser that it welcomes comprehensive credit reporting (CCR) and open data initiatives, but said that the systems could be extended further.

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Under the current law, large banks and their subsidiaries will need to provide comprehensive credit information on open and active consumer credit accounts to certain credit reporting bodies from 1 July 2018. 

This includes positive credit information (i.e. details of when a borrower had paid down a loan in full with no defaults, etc.) as well as negative credit reports. 

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The regime will enable a credit provider to “better meet its responsible lending obligations and price credit according to a consumer’s credit history” and give consumers better access to their credit and therefore be able to better demonstrate their creditworthiness. 

OnDeck CEO Cameron Poolman told The Adviser that he welcomes the initiatives but believes they could also be extended to businesses.

Mr Poolman said: “The open data initiative (and a part of that is comprehensive credit reporting) will provide a more level playing field for alternative lenders. More access to data will essentially provide a better result for customers, as we will have more information to be able to provide a customer with a product that is more relevant to them based on the incremental information. That will be data either provided through the banks or data provided from other government departments such as the tax office.

“In time, that sort of information will be helpful to us in being able to make a decision. So, the financial industry, by being able to access more information, will theoretically enable us to play on a more even playing field.” 

The OnDeck CEO outlined that he believes the open data and CCR initiatives will help provide more clarity to consumers, as “consumers and small businesses often don’t know their credit score in Australia”. 

Noting that there had been several large schemes put in place to overcome this (including OnDeck’s Know Your Score initiative, powered by Equifax), Mr Poolman said that it was of paramount importance to raise awareness of how credit score can influence the ability to access credit and the prices that borrowers pay.

“Through OnDeck, we do have risk-based pricing, so the better your credit score, the lower price you are going to get,” Mr Poolman said.

“So, it’s really important for us. We are trying to build an awareness with our customers so they understand that score, and that is why we provide that free service for them to do it. If you have a bad score, it’s worthwhile for a small business to understand why. There may be a late payment or some reason that they can rectify that, so it’s important for them to understand that.” 

He continued: “In terms of CCR, that has been mandated by [the] government around the consumer, not the commercial, so it is only the consumer score that will have CCR around it.

“At this point, we are not seeing anything from [the] government around CCR for commercial entities, so we are unsure when and if that happens, but in the US there is CCR for consumers and commercial.”

Mr Poolman elaborated: “If a small business takes out a loan with OnDeck [in the US] and pays it back in the appropriate time, that is positively reported back to the bureaus and their credit score goes up. 

“Many of our customers take out several loans with us, and in time their score goes up to such a level that they become eligible to get a loan from a cheaper funder than ourselves. And we’re happy with that ecosystem. 

“So, in time, we are hoping that that eventuates in Australia as well.”

[Related: CCR a ‘game changer’ for mortgages]

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