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Media Release 4th November 2011

New credit reporting laws being rolled out by the Federal Government which will allow late payments to be noted on Australian credit files after one day, could disadvantage millions of potential borrowers and seriously hurt the Real Estate and Mortgage Industries, a national credit rating repairer says.

Director of MyCRA Credit Repairs, Graham Doessel says the new laws will mean there is no room for error with consumers or creditors.

“In these harsh economic times, the ‘noting’ of late payments on a person’s credit file will most definitely impact on the consumer’s ability to obtain finance.”

“If the late payment of a few days is due to delays in bank processing of transfers or direct debits, paying at Australia Post, BPay etc. - these things are beyond the control of the average consumer yet that is exactly who will get hurt,” Mr Doessel says.

Under current credit reporting legislation, late payments are not noted on a person’s credit file until they pass to the ‘default’ stage - which is more than 60 days in arrears.

The creditor is also bound to fulfil a series of requirements to give the consumer the opportunity to rectify the situation before listing the default.

This legislation will remain, but the Government will also  introduce ‘repayment performance history’ which among other things will allow for credit providers bound by the National Consumer Credit Protection Act to make late payment entries on a person’s credit file if payments are late even as little as one day.

“As far as lenders are concerned, any negative entry will not bode well for obtaining credit in the current economic climate.”

“With the potential for error quite high in this instance, it amounts to a giant step backwards for the consumer,” Mr Doessel says.

The possible volume of credit files with errors was revealed by a small scale study conducted in 2004 by the Australian Consumer Association (now Choice Magazine), revealing about 30% of credit files were likely to contain errors.

“In our view, there are serious, systematic flaws which are leaving an increasing number of Australian consumers vulnerable to defamation, mis-matching and harassment,” the ACA report said.

With more than 14 million credit files in Australia (14 million files are held by credit reporting agency, Veda Advantage alone)- transferring those figures from the Choice study could mean possibly as many as 4 million errors are currently exist on credit files in Australia.

Recently, Today Tonight spoke with Veda Advantage Spokesperson, Chris Gration on the possible number of errors on credit reports.

“We give out about 250,000 credit reports to consumers every year. But only in 1 per cent of cases is there a material error on the file - so a default or an enquiry that’s incorrect,” Mr Gration told Today Tonight.

But Mr Doessel says, “Even if as little as 1 per cent of those 14 million credit files contained errors, that would still currently leave 140,000 credit files in Australia containing errors that just shouldn’t be there.”

“If creditors are able to list ‘late payments’ on credit files as well - and someone gets that wrong, thousands of credit file holders could then be affected on top of the current statistics - if not millions if we apply the 30% statistic for likelihood of error,” he says.

Under current credit reporting legislation, the responsibility of checking credit reports for error rests with the consumer. Credit file holders are able to obtain a copy of their credit report from one or more of Australia’s credit reporting agencies for free every 12 months.

But Mr Doessel says consumers are often not aware across the board of their responsibility to check the accuracy of their own credit file, so many errors go undetected.

“Often it is not until people apply for credit that they learn they have an adverse listing on their credit file, but by then it is too late - they are generally refused credit,” he says.

Adverse listings remain on a person’s credit file for 5-7 years, depending on the type of listing. If people find errors on their credit file after the credit check, Mr Doessel says navigating the current credit reporting system can be difficult if they want to get the black marks removed.

“When disputing any adverse listing, it is up to the credit file holder to provide reason as to why the creditor has not complied with legislation. Unfortunately negotiating with creditors is not always easy for the individual to undertake, hence the need has arisen for credit repairers, to close that gap and enforce the legislation which creditors are bound to comply with.”

“Given this difficulty, I also fear getting ‘late payment’ errors removed from credit files may be just as problematic,” he says.

If people want to obtain more information on removing errors from credit files, they can contact MyCRA Credit Repairs toll free on 1300 667 218 or visit their website  http://www.mycra.com.au

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When taking out a home loan it’s not as simple as one monthly or fortnightly payment.

There are a number of additional costs the borrower will incur in the process of buying a home.

Your mortgage broker will guide you through the fees, but if you’re unsure ask them what they are, so there are no surprises after you have signed on the dotted line.

The following is a list of the additional costs associated with taking out a mortgage.

Don’t panic, you most likely won’t have to pay all of them, what and how much you pay depends on your individual circumstances.

Application or Establishment Fee:

Usually a once off fee paid to the lender upon getting unconditional approval for the loan to cover the cost of setting up the home loan.

Break Out Costs:

Lending institutions may charge a fee if you break out of a Fixed Rate Loan before the end of the fixed period. The amount charged usually depends on the amount of money still owing on the loan.

Deferred Establishment Fees or Exit Fees:

These fees usually occur if you decide to refinance a loan or move to another loan product. The fee will depend on whether you’re moving your loan from one lender to another, or to a new product from the same lender.

Legal Fees and Disbursements:

These fees are charged by the borrower’s solicitor to the borrower to finalise the mortgage contract. They are to check the vendor has the right to sell the property and if so, change the ownership of the property to the borrower’s name.

Lender’s Mortgage Insurance (LMI):

If a borrower doesn’t have a 20%, deposit for the property the lender will usually require LMI. This is a once only premium paid on loan settlement to protect the lender (not the borrower) in case of default on the loan.

Monthly Account Management/Service Fees:

Charged monthly and are usually included with your repayment, to cover the costs of administering and managing the mortgage.

Mortgage Registration Fee:

This is a set fee paid to the Land Titles office of the State Government when the property is sold and is paid by the party who purchased the property.  

Property Valuation:

Lending institutions will have their accredited property valuer’s conduct a valuation of the property they are lending the money for; this cost is usually passed onto the borrower.

Stamp Duty:

Every homebuyer is required to pay his or her State Government stamp duty on the purchase value of the property. This is charged on a sliding scale based on the property value. Stamp duty amounts and calculators can be found on the State Government’s Office of Revenue websites.

Transaction Fees:

Usually associated with Mortgage Accounts, examples are Lines of Credit and Offset Accounts. A fee is charged when you withdraw money from the account, however most lenders offer a number of free transactions per month.

Disclaimer: This document is for information purposes only, and must not be relied upon as a substitute for professional services or legal advice.                                                                           

         

 

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First home buyers, existing property owners and property investors take note:

Australia’s lending environment is in for a shake up.

With bad lending practices at the very heart of America’s economic meltdown, it’s no surprise that legislators in Australia are taking a long, hard look at our own consumer credit laws.

These are the rules under which providers of consumer credit (including home lenders, mortgage brokers, lease finance providers and other intermediaries) have to operate, and the federal government has decided it’s time for a new, uniform national approach.

The government’s National Consumer Credit Protection Bill has been before parliament and passed, the new rules come into full effect January 2011.

What’s changing?

The new laws will create a single, national regime for regulating consumer credit -that’s everything from home and car loans, to credit cards and retail lending.

Until now, consumer credit providers haven’t required a license to operate (except in Western Australia).

Regulations have applied in states such as New South Wales and Victoria, but there’s been no licensing requirement.

The big change will be that licensing becomes mandatory across Australia.

Every home lender and mortgage broker will have to obtain a license from the Australian Securities and Investments Commission (ASIC) and they won’t be able to operate without one.

License to lend… responsibly

In addition to obtaining a license, credit providers will also need to comply with a new set of ‘responsible lending’ requirements that also come into force in January 2011.

These include rules aimed at preventing credit providers from offering customers products and services that are ‘unsuitable for their needs’ or that they don’t have the capacity to repay.

There will be new rules for the disclosure of commissions, for professional indemnity insurance arrangements, and for participation in external dispute resolution programs - all good news for the consumer.

For lenders, the changes may also mean a review of lending practices, with a new emphasis on ensuring that borrowers have a demonstrated ability to repay, rather than simply relying on the ‘assets’ they can use as security.

Good or bad for home borrowers?

The new laws are a win for borrowers and are likely to improve standards across the credit industry as a whole.

The effects might be negligible for the majority, but the new rules will make it much more difficult for unscrupulous credit providers to operate at the margins.

Consumer credit providers will need to ensure that, when they lend you money, you have the capacity to pay it back.

There will be protection through court arrangements, as well as penalties for misconduct.

Dispute resolution processes will be free for consumers and providers will also need to supply their credit assessments if asked.

For the first time, the laws will also cover credit extended for the ‘purchase or renovation of investment property’, not just loans on your primary residence.

Stay smart

While the new laws mean that credit providers will need to ensure you have the capacity to repay, this doesn’t mean you should blindly sign up for a home loan assuming that you can.

You should remain as careful as ever about the amount of debt you’re taking on and be mindful of your circumstances and how they might change.

Use a budget planner and borrowing power calculator to see how changes in your circumstances might affect your ability to repay.

Good news overall In terms of transparency and accountability, the proposed changes will bring increased protections for consumers and improvements to lender practices more broadly. If it works as designed, the legislation will bring uniformity to consumer credit laws across Australia, and introduce a licensing regime with significant penalties for non-compliance.

Welcome news for borrowers and the industry as a whole.

Ph: 1300 735 161   Mobile: 0408 446 639

www.mrsmortgage.com.au
                                                               

        

 

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