Galexia

Submission - Credit Reporting Regulatory Framework: Submission to ALRC Privacy Inquiry (December 2007)

3.4. Proposed Regulatory Framework

The proposed regulatory framework for credit reporting developed in this Report can be summarised in the following table:

Privacy Recommendations

Consumer Protection Recommendations

General principles

The Privacy Act 1988 should contain a brief section on credit reporting that includes four key elements:

  • A definition of credit reporting and credit reporting information.
  • A requirement that credit reporting and credit reporting information are to be regulated by the proposed Privacy (Credit Reporting Information) Regulations.
  • A broad principle limiting the extent of access to credit reporting information to credit providers and organisations that require access to credit reporting information for the management of credit (e.g. debt collectors).
  • A broad principle that complaints can be made to the Office of the Privacy Commissioner in relation to credit reporting in accordance with both the Act and Regulations.

General principles

A set of high-level general principles that covers all credit providers should be included in Australian law, including:

  • A requirement to act honestly and fairly.
  • A requirement to undertake training and maintain the competence of staff and representatives.
  • A requirement to join an approved EDR scheme.
  • A requirement to assess a consumers’ ability to repay a loan without suffering undue hardship.

These principles should be included in amended credit legislation (e.g. the UCCC) or in an amended Corporations Act 2001 that includes credit in its jurisdiction.

Detailed regulations

The proposed Privacy (Credit Reporting Information) Regulations should include both principles and detailed regulations on at least the following key privacy rights:

  • Notice
    This is a key privacy right once consent is removed as a privacy protection, and requirements for timely and effective notice need to be in the regulations in order to balance the removal of consent.
  • Accuracy
    Data accuracy is a key privacy right in credit reporting as the consequences for consumers of inadequate data are so severe.
  • Access
    Access is a key privacy right in credit reporting as the consumer is in the best position to assess the accuracy of data that is being used and must be able to review and correct this data.
  • Complaints
    Complaints play a significant role in credit reporting and consumers must be guaranteed access to simple, fast and affordable dispute resolution processes.

Detailed regulations

Detailed regulation of responsible lending and responsible credit marketing should include the following:

  • Regulation on what factors should be included in a proper assessment of a consumer’s capacity to repay a loan (e.g. verification of income, assessment of credit reporting information etc.).
  • Tests or definitions of terms, including ‘capacity’ and ‘hardship’.
  • Regulation of what content should be prohibited in responsible credit marketing (e.g. use of the term ‘pre-approved’).
  • Limits on credit marketing (e.g. regulation, if appropriate, of unsolicited credit marketing).

This detailed regulation should be included in amended credit legislation (e.g. the UCCC) or in an amended Corporations Act 2001 that includes credit in its jurisdiction.

Industry operating rules and best practice

Some outstanding issues may be covered in an industry Code. These might include:

  • Reciprocity.
  • Data consistency.

However, this Report notes that in light of the cost and complexity of developing an industry Code, some further consideration should be given to including reciprocity and data consistency in the Regulations.

Industry operating rules and best practice

This Report suggests that an industry Code (covering all credit providers) or a regulator’s guideline are the best location for detailed industry operating rules and best practice guidance in relation to responsible lending and responsible credit marketing. The content could include:

  • Guidance on what inquiries constitute a proper assessment of a consumer’s capacity to repay a loan.
  • Guidance on what content should appear in responsible credit marketing (e.g. warnings about credit risk).