Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Josh Frydenberg MP)General outline and financial impact
Mandatory comprehensive credit reporting
Schedule 1 to the Bill amends the Credit Act to mandate a comprehensive credit reporting regime (the mandatory regime). Under the regime eligible licensees, who on 1 April 2020 are large ADIs, must provide credit information on consumer credit accounts to credit reporting bodies.
Schedule 2 to the Bill amends the Privacy Act 1988 to permit reporting of financial hardship information within the credit reporting framework. Schedule 2 to the Bill also makes other minor changes to improve the overall administration of credit reporting.
Date of effect: The day after Royal Assent.
Proposal announced: In the 2017-18 Budget, the Government undertook to mandate a comprehensive credit reporting regime if credit providers did not meet a threshold of 40 per cent data reporting by the end of 2017.
On 2 November 2017 the then Treasurer, the Hon Scott Morrison MP, announced that the Government would mandate comprehensive credit reporting.
On 2 August 2019, following a review into the operation of financial hardship arrangements, the Attorney-General, the Hon Christian Porter MP announced that the Government would make amendments to the Privacy Act 1988 to introduce a new type of credit information - financial hardship information - to be reported with repayment history information.
Financial impact: Nil
Human rights implications: This Bill does not raise any human rights issues. See Statement of Compatibility with Human Rights - in Chapter 3, at paragraphs 3.1 to 3.67.
Compliance cost impact: The estimated average annual regulatory cost associated with the mandatory credit reporting requirements is $8.2 million.
Summary of regulatory impact statement
Impact: The reforms to mandate the supply of comprehensive credit information will have a regulatory impact on certain credit providers and credit reporting bodies.
Main points:
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- The Treasury has certified that the Productivity Commission's Inquiry into Data Availability and Use as meeting the requirements of a regulation impact statement as well as through extensive consultation with industry stakeholders..
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- The Productivity Commission's Inquiry into Data Availability and Use can be found on the Productivity Commission's website:
- https://www.pc.gov.au/inquiries/completed/data-access/report
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- The Productivity Commission's Inquiry into Data Availability and Use noted that the effective and efficient operation of credit markets relies upon credit providers being able to access sufficient and reliable information about borrowers as a basis for making lending decisions, and that comprehensive credit reporting would be a desirable reform in this respect.
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- The Productivity Commission's Inquiry into Data Availability and Use found that government action may be necessary as a 'circuit breaker' if no progress towards a critical mass of comprehensive credit information was made by mid-2017, due to the existence of a first-mover problem. Credit providers will only invest in the necessary systems and procedures necessary for comprehensive credit reporting if there is a benefit to be gained, which will only be the case if other credit providers are participating in the system.