Transitioning to CCR: Our thoughts on the path to a secure and transformative regime
Recently, I represented Experian A/NZ at the Economics Legislation Committee Senate Public Hearing, tasked with sharing our standpoint and expertise on Australia’s upcoming National Consumer Credit Protection Amendment (Mandatory CCR).
With 17 out of Experian’s 19 global credit bureaus already operating in comprehensive credit reporting environments, we’ve seen firsthand how powerful the adoption of positive data sharing can be. So, this was an exciting opportunity to share (and expand on) three decades of experience with the Senate and wider society - ahead of Australia’s own CCR journey.
We are firm advocates of the new regime’s ability to deliver a much fairer system to both credit providers and customers alike, and the potential for it to improve financial literacy and hardship across the country. But managing the secure transition to the new status quo will take comprehensive education, a commitment to broader data sharing and shared goals from all parties involved.
Enabling responsible lending and improving hardship
Our business is centred on helping individuals take financial control and access financial services, as well as encouraging companies and lenders to make smarter decisions.
Sharing positive data under the CCR regime helps credit providers better identify and evaluate who to provide credit to, enabling more responsible lending choices and providing more Australians with better credit opportunities. Providing a fuller picture of a customer’s financial circumstances better positions credit providers to make case-by-case decisions with a holistic view of the customer’s repayment history at hand. With this broader view, working out unique agreements before a customer defaults and receives a black-mark on their credit report is made easier, ultimately helping provide more appropriate lending decisions and credit solutions and outcomes for the consumers.
We’ve seen from other markets that CCR also creates an environment with more competition and lower prices for consumers, and can reduce the number of people who may default on a loan. In fact, around the world, CCR has improved:
- Access to credit among younger, poorer and underserved borrowers by 40% in the US
- Credit card lending by almost 10% in Hong Kong
- Probability of delinquencies of 60+ days by 34% in Japan
Fostering financial literacy
Another huge advantage of CCR is the opportunity to improve financial literacy amongst the Australian population. Consumers are the ultimate beneficiary of this system and we need to help everyone understand what is happening and how this will impact them.
Our research from last year revealed 71% of Australians had never checked their credit score before, and 56% didn’t know what it was or how to check it. More worryingly, it was very clear that there’s a lot of confusion about what monetary decisions and behaviour has an impact on credit scores.
We need to continue to invest in driving the education agenda by delivering a range of additional education initiatives across consumer and business audiences. Knowledge is power and it enables consumers to know where they stand and address any issues before applying for a new credit card, loan or mortgage.
Broader data sharing is vital
From where we started – a purely negative data sharing environment – we’re well on our way to an effective CCR regime, and with careful consideration we could surpass global best practice and further maximise consumer benefit from CCR.
But we need to broaden the depth of the data being shared to incorporate additional data attributes – particularly account balance and repayment amounts. Including other banks beyond the Big 4, as well as non-financial institutions, such as telecommunication and utility companies, is also imperative if credit providers are to make truly informed decisions.
As a collective industry, we have the opportunity to play a significant and influential role in this shift, and Experian shall continue supporting industry and the Government to ensure a successful implementation of a mandatory CCR regime.
It was an honour to play a small role in guiding understanding of the topic at hand in the public discourse at the recent Senate hearing, and I look forward to a secure, transformative road ahead.
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