Australia to force banks to share their credit data

By David Tuckwell on Wednesday 1 November 2017

Alternative Lending

Treasurer Scott Morrison will twist the banks arms and make them share customers credit history

Australia will mandate comprehensive credit reporting. 

The Australian government will force major banks to share their millions of customers credit data in an effort to make loans more affordable and generate competition in banking.  

Speaking at a fintech conference in Melbourne on Thursday, Treasurer Scott Morrison announced he would mandate comprehensive credit reporting from the middle of 2018, with new requirements being slapped on the big four.

“We intend to start with the four major banks, given they account for approximately 80 per cent of the volume of lending to households," Mr Morrison said.

“Other credit providers will then be targeted too.”

Credit reporting in Australia has to date been mandatory only for negative data. That is, when borrowers default, are late on payments, appear in court, etc. the data is recorded and shared.

For positive credit data – i.e. when borrowers perform well – the credit reporting scheme is purely voluntary and less than one percent of data is being shared. Voluntary sharing has been in place for three years and fintechs have complained that only they are sharing data. Some fintech companies have also complained that without the participation of the major banks, a credit reporting scheme won’t work.

Banks, for their part, have complained both about the complexity and cost. They have said that they have invested millions in compiling these data sets and that sharing them is unfair. They have also said that the regime is too complex.

Mr Morrison, however, said it was “entirely achievable,” and mentioned how it had been achieved in other countries.

“This has long been the case in the UK and US where customers can use their histories as leverage.”

Under the new plan, the big banks will have to have 50 percent of their customers’ data ready for sharing by July next year and all of it by mid-2019. Mr Morrison said that if the regime is successful it could be extended to other utilities like gas.

The influential government think tank the Productivity Commission last year said that a comprehensive credit regime was “premature”. Mr Morrison’s announcement comes as an overruling of the Commission’s recommendation. 

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