‘Game changer’ to force Big Four banks to share credit data

‘Game changer’ to force Big Four banks to share credit data

Australian Treasurer Scott Morrison has announced that Australia’s Big Four banks must share detailed credit data about millions of customers to stimulate greater competition in banking, says The Sydney Morning Herald.

The system known as “comprehensive credit reporting (CCR)” will operate from the middle of next year.

While credit reporting has been voluntary for the past few years, from July 2018 onwards the major banks must give credit bureaux more detailed data about their customers’ financial behaviour.

The move is designed to allow competitors to the major banks to better assess risk and potentially offer deals at better prices to those offered by larger companies, which hold the vast majority of customer data.

“This will be a game-changer for both consumers and lenders, and will lead to greater competition in lending and naturally provide better access to finance for Australian households and small businesses,” Mr Morrison said.

“For borrowers, this regime should lead to one thing—a better deal on your mortgage, your personal loan or business loan.

“If you have a good credit history—you’re paying down your mortgage, you haven’t missed a payment on your car loan and your credit cards are under control—you will be able to demand a better deal on your interest rates, or shop around, armed with your data,” he said.

The move on credit history data was sparked by the failure of the banking sector to reach a 40 per cent data-reporting target by the end of the year, says The Australian.

That target was announced by the Treasurer in the May budget, which featured several harsh measures aimed at the sector, such as the $6.2 billion bank tax and new powers for the regulator to sack bankers and withhold bonuses.

The Treasurer’s announcement was welcomed by many in the financial community.

Founder and CEO of Melbourne-based marketplace lender MoneyPlace Stuart Stoyan said the changes would level the playing field in favour of customers.

“[It] will especially help borrowers with a good credit history who make their repayments on time, rewarding their good behaviour with fairer rates,” said Mr Stoyan.

“CCR will be very important, for us, as we will see information on good credit histories, and for Australians who will be able to use the information to get a better deal,” Society One CEO Jason Yetton told the AFR.

In its recent report on data use and availability, the Productivity Commission urged the government to legislate mandatory credit reporting if banks failed to get public reporting up to 40 per cent, a level that Canberra said must be reached by the end of this year.

Under the government’s plan, Mr Morrison said the Big Four would be required to have half of their credit data ready for reporting by July 2018, and 100 per cent of the data by mid-2019.

While banks have emphasised the complexity of CCR, Mr Morrison said the government viewed the timetable as “entirely achievable”.