Timely focus on credit laws

Tuesday, 12 December 2006: As many people rely on credit to help them through the festive season, the Australian Law Reform Commission (ALRC) today launched an Issues Paper calling for public comment on Australia ’s credit reporting system.

ALRC President Prof David Weisbrot said the credit reporting provisions of the Commonwealth Privacy Act were overly complex and hard to follow, and were under scrutiny as part of the ALRC’s major review of Australia’s privacy laws.

“Credit information is now required as part of so many day-to-day transactions, such as establishing a mobile phone account or buying furniture on interest-free terms. That’s why it’s critical that the laws strike the right balance between providing information to credit providers and protecting the privacy of the individual.”

Prof Weisbrot said the ALRC issues paper, Review of Privacy—Credit Reporting Provisions (IP 32), outlines the strict limitations in Australia under the Privacy Act about the categories of personal information that may be collected and used as part of the credit reporting process.

“Credit providers have argued that under the current system, it is too difficult to find out enough information about the credit history of someone who is applying for credit, making it difficult for them to fully assess the risk of providing credit.

“Lenders argue that having more comprehensive information available to them would increase efficiency and competition, and help reduce the cost of credit—particularly for those who are low credit risks,” Prof Weisbrot said.

However, opponents of comprehensive credit reporting—sometimes called ‘positive credit reporting’—say there’s no proof that it assists in managing risk; that it could lead to dramatically increased levels of lending, particularly to disadvantaged groups; and that it is ‘fraught with privacy and security risks’.

The Commissioner in charge of the Inquiry, Prof Les McCrimmon, said that the Issues Paper sets out the arguments for and against comprehensive credit reporting and its potential impact on privacy.

IP 32 also looks at a range of reform options for credit reporting, including whether new and separate legislation is required to regulate credit reporting.

Prof McCrimmon said some of the issues being considered by the ALRC include:

• the types of information held in credit information files and credit reports;
• how credit reporting agencies and credit providers are required to protect personal information; and
• the system for resolving complaints about credit reporting, including complaints about the accuracy of information on a credit file.

He said that the ALRC is consulting with specific stakeholders, such as consumer groups and the finance industry—but also wants to hear the views of all Australians.

“With that in mind, the ALRC also has launched a plain-English guide to the Inquiry, Reviewing Australia’s Privacy Laws: Is Privacy Passé? (IP 31 & 32—Overview),” Prof McCrimmon said.