Submission to ACCC about registration of ARCA’s Principles of Reciprocity and Data Exchange

Financial Rights put in a joint submission with Consumer Action Law Centre and Financial Counselling Australia to the ACCC regarding the registration of ARCA’s Principles of Reciprocity and Data Exchange (PRDE).

Our organisations have for many years expressed concerns about the impact of comprehensive credit reporting (CCR) on consumers. However, the legislature by enacting CCR has indicated that it considers such a regime beneficial despite these concerns. In our view, it seems that the CCR regime cannot be effective unless there is an element of reciprocity, as demonstrated by the lack of industry participation in CCR to date. We acknowledge that there are some benefits of the PRDE. At the very least it is a positive step towards having a single source of free credit reports for consumers, and it is likely to improve consistency in data reporting and competition amongst credit reporting bodies (CRBs). However, we wish to provide some alternate views on a number of the other public benefits articulated in ARCA’s application. In our view, CCR may be detrimental to consumers, particularly those who are financially excluded and marginalised, meaning transparency and enforceability of any reciprocity arrangement is imperative.

Our key concerns are that the PRDE does not resolve the critical problem of consistency in treatment of hardship variations on credit reports, and that the proposed PRDE may interfere with legitimate settlement negotiations that relate to the listing of credit defaults. Briefly, this submission also argues that:

• the PRDE may result in increased lending, thereby increasing the overall number of consumers in default;
• while the PRDE is likely to reduce costs for some consumers, this will unlikely be the result for Australia’s most vulnerable and marginalised consumers and may exacerbate financial exclusion;
• licensed credit providers (CPs) cannot rely on a comprehensive credit report to comply with their responsible lending obligations, nor can the financial regulator rely on a report to enforce these obligations;
• lower credit default rates are more a function of lender‟s risk appetite rather than a reflection on the quality of information provided to lenders;
• the PRDE will only be effective if the vast majority of CPs sign up to it;
• we are not convinced the monitoring, reporting and compliance process in the PRDE is sufficiently independent and transparent; and
• a comprehensive review process is needed to ensure that the PRDE is actually in the public interest.