‘Positive’ or ‘more comprehensive’ credit reporting?

55.6 Much of the literature distinguishes between two distinct systems of credit reporting: ‘negative’ and ‘positive’ credit reporting.[1] The difference between these two sorts of credit reporting is said to lie in the kinds of personal information that can be collected as part of the credit reporting process. As the term suggests, negative credit reporting involves ‘negative’ information—that is, information that detracts from an individual’s credit worthiness, such as the fact that he or she has defaulted on a loan. On the other hand, positive credit reporting is said to involve ‘positive’ information about an individual’s credit position and includes information relating to that person’s current credit commitments. An example of information in this category is a record of an individual having made a loan repayment.

55.7 The terms ‘negative’ and ‘positive’ credit reporting are sometimes used as convenient shorthand expressions to distinguish between what is permitted under the current law (negative reporting) and what may be permitted if the current restrictions on reporting were relaxed (positive reporting). The use of the terms in this way involves a significant over-simplification because the credit reporting provisions currently permit the collection of some ‘positive’ items.[2]

55.8 More fundamentally, the term ‘positive credit reporting’ may be misleading because information collected through a positive credit reporting scheme can, in reality, be positive (in the sense of enhancing an individual’s credit worthiness) or negative (that is, detracting from credit worthiness) depending on the particular situation. For example, ‘data that is not default data can still be negative if it concerns missed payments or even very high levels of debt’.[3]

55.9 Therefore, a debate on whether ‘positive’ information should be included in credit reporting runs the risk of introducing a false premise—namely, that all information in this category would enhance the credit worthiness of the individual concerned. It is important that the debate be framed more clearly. As a result, the focus of this chapter is on whether it is appropriate to expand the categories of personal information involved in credit reporting and, if so, how.

55.10 Partly as a response to this semantic problem, some terms have been developed as alternatives to the term ‘positive’ credit reporting. The alternative term with the widest currency is ‘comprehensive’ credit reporting.[4] This term is preferable because it conveys more clearly that the information covered will not necessarily assist, nor hamper, an individual’s application for credit. ‘Comprehensive’ in this context does not necessarily mean ‘all’ conceivable personal information of a financial nature that relates to an individual’s credit worthiness. It is more appropriate, therefore, to talk about a more comprehensive system of credit reporting because this more accurately conveys the idea that what is being proposed is an expansion of the types of information a credit reporting agency can collect.

55.11 While the use of the term ‘positive’ credit reporting has become prevalent in describing proposals to expand credit reporting in Australia, the ALRC considers that ‘comprehensive’ or ‘more comprehensive’ credit reporting represent clearer and more accurate short-hand expressions. Therefore, when the terms ‘comprehensive’ or ‘more comprehensive’ credit reporting are used in this chapter, they simply refer to a system of credit reporting that permits more types of personal information to be collected and used in credit reporting than is currently allowed under the Privacy Act.

[1] See, eg, Consumer Affairs Victoria, The Report of the Consumer Credit Review (2006); Parliament of Australia—Senate Legal and Constitutional References Committee, The Real Big Brother: Inquiry into the Privacy Act 1988 (2005).

[2] That is, a record of a credit provider being a current credit provider in relation to the individual: Privacy Act 1988 (Cth) s 18E(1)(b)(v); a record of an enquiry made by a credit provider in connection with an application for credit, together with the amount of credit sought: s 18E(1)(b)(i).

[3] Experian Asia Pacific, Submission PR 228, 9 March 2007.

[4] See, eg, Centre for International Economics and Edgar Dunn and Company, Options for Implementation of Comprehensive Credit Reporting in Australia [Prepared for MasterCard Worldwide] (2006). Another synonym is ‘full-file reporting’: see, eg, Consumers’ Federation of Australia, Full-File Credit Report: Is it Really the Answer to Credit Overcommitment? (2005) <www.consumersfederation.com/documents/
PositionPaperFeb05.doc> at 1 August 2007, 1.