The peak body for credit is pushing for a broad-scale rethink of reporting rules after a minor shortfall derailed a borrower’s home loan.
The nation’s peak credit industry body is calling for targeted reforms to the credit reporting regime after a NSW Supreme Court judge condemned Westpac’s handling of a $44 mortgage shortfall, which prevented the borrower from settling on a new home.
The case centres on Sydney borrower Fiona Vinall, who is suing Westpac‑owned St.George over a sequence of events, which began with an interest rate cut on her home loan last July.
After receiving bank emails stating that a lower rate would apply “after July 10 2025”, she began paying the reduced amount a month earlier than the bank expected, leaving a shortfall of just over $44 on one repayment.
St.George treated the gap as a missed payment and reported “adverse repayment history information” to credit bureaus, with the notation remaining on her file.
Later in 2025, Vinall was unable to settle on her home in Box Hill, Western Sydney, due to the damaged credit report, and then launched legal action after St.George ignored her requests to remove the listing.
At an initial trial in January, no one appeared for the bank, yet when Westpac eventually sent lawyers to a later hearing to defend the listing, Justice David Hammerschlag said the bank had come to court “seeking to defend the indefensible” and rejected arguments it was powerless to alter information already supplied to Equifax.
In written reasons, Hammerschlag said he regarded the bank’s refusal to rectify the issue as “legally unjustifiable and short on commercial morality.”
The matter is being transferred to the District Court for a damages hearing, with Westpac insisting it would continue to comply with “mandatory credit reporting obligations under law.”
The court ordered for the adverse credit entry to be removed.
ARCA says framework “no longer fit for purpose”
The case has prompted the Australian Retail Credit Association (ARCA) to renew calls for modernising credit rules that sit behind cases like Vinall’s.
The ARCA – which represents major banks, mutuals, consumer finance firms, fintechs, and the big credit reporting bodies – said the case exposed a lack of proportionality in the current framework.
ARCA CEO Elsa Markula said the regime had not been meaningfully reformed for more than a decade, despite significant changes in lending practices and consumer expectations.
“The system plays a critical role in supporting responsible lending and financial inclusion. But as consumer expectations and international standards evolve, the framework must keep pace,” she said.
Markula said there was now “a clear case for targeted reforms which will bring Australia in line with international counterparts”.
“Key targeted reforms could include reforms to ensure there are thresholds for reporting payment history, which means small unintentional missed payments do not negatively impact consumers’ credit histories,” Markula said.
She also stressed that the legitimacy of the system depended on striking the right balance.
“Confidence in credit reporting depends on a system that is balanced and responsive to modern lending practices. The Government is well‑placed to move forward with these targeted reforms to ensure system settings continue to deliver the balance,” Markula said.
Consumer advocates warn of lasting harm from minor errors
Consumer groups echoed the ARCA’s concerns that the current system was overly unforgiving of minor errors, with Julia Davis from the Financial Rights Legal Centre stating that Vinall’s experience reflected problems advocates had already voiced at an independent review of Australia’s credit reporting framework.
“This case highlights longstanding issues in aspects of the current credit reporting framework that both consumer advocates and industry identified in the independent review more than a year ago,” Davis said.
“One of the clearest examples of low-hanging fruit for reform is ensuring that minor, inadvertent errors are easily correctable and do not have lasting consequences.
“Credit reporting is meant to communicate a person’s creditworthiness to future lenders. A $40 mistake that was quickly rectified does not reflect someone’s ability to manage credit.”
She also warned that “not every consumer has the resources or confidence to take a matter to court”.
“The credit reporting framework should be clear, fair and easily correctable, particularly where a minor error does not reflect someone’s actual creditworthiness,” Davis said.
Frontline repair firm backs push for thresholds
CEO of Credit Fix Solutions, Victoria Coster, told The Adviser that disproportionate listings had become exceedingly common and that Vinall’s case mirrored what her firm was repeatedly seeing when it reviewed consumer files.
“The NSW Supreme Court ruling highlights what we see every single day at Credit Fix Solutions, which is a credit reporting system that lacks proportionality,” Coster said.
“Around 80 per cent of the 30 reports we review daily involve families impacted by minor, often unintentional missed payments or excessive credit inquiries that continue to damage their ability to access home loans.”
Coster pointed to overseas practices as inspiration for reform, noting that New Zealand already provided soft inquiry options and clearer reporting thresholds.
“Australia can and should modernise its framework to protect consumers, while still maintaining integrity for lenders,” she said.
“After more than a decade without substantive reform, it is now the government’s responsibility to ensure the framework reflects fairness, proportionality, and the realities of modern lending.”
[Related: Broker share grows as Westpac mortgage book expands]
