Pay Your Bills ‘On Time’ Millions may be refused credit in Australia due to new laws
January 6th, 2012Brought to you by My CRA
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