'Good' bank customers to get lower rates under Australia's new reporting rules

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The logo of the ANZ Banking Group is displayed in the window of a newly opened branch in central Sydney, Australia, Aprl 30, 2016.
The logo of the ANZ Banking Group is displayed in the window of a newly opened branch in central Sydney, Australia, Aprl 30, 2016. Reuters/David Gray/File Photo

The Turnbull government released on Thursday an exposure draft legislation that could lead to better deals on personal loans, small businesses loans and mortgages. Bank customers with good credit histories will now see their information becoming available to all lenders, allowing them to get lower rates and be better placed to shop around.

Australia’s big four banks have volunteered to participate in contributing their credit data in the months ahead. Major banks, under the draft legislation, will be required to supply 50 percent of their comprehensive credit data to reporting bodies by July 1. The amount of data will increase up to 100 percent after a year. Banks will be given time to meet these deadlines through a 90-day transitional period.

The new rule in credit reporting seeks to deliver a better deal for bank customers. Another way it can benefit customers and businesses alike is that innovative FinTech and other new entrants can use comprehensive credit reporting information, eliminating a barrier to entry currently in the system.

Also, the new rules will help open up the lending market to competition as it allows new lenders into the market. They will be able to better assess credit risks and meet responsible lending responsibilities while reducing exposure to defaults at the same time.

This is good news for a number of small business owners because they can gain better and faster access to credit. This means they can invest more in making their business grow, hire more people and give workers a better pay.

Credit providers that fail to supply up-to-date credit reporting information will face penalties. The Australian Securities and Investments Commission is tasked to monitor compliance with the new regime.

“At this point in time, the requirement to participate in comprehensive credit reporting will not extend beyond the major banks, as 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,” a media release from the government states. But the draft legislation will include the power to broaden the mandate to incorporate other credit providers if necessary.

The government has consulted with industry, regulators and security agencies about the security of consumer data. Credit reporting bodies will face a new responsibility as to where consumer credit data can be stored. The bill builds on the current protections established by the Privacy Act and Code.