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According to research from Arca, the current credit reporting system is limiting. A refreshed approach could ease the friction for both brokers and borrowers.
The data revealed nearly half of Aussie borrowers are uneasy about how their credit information is shared.
Another one in five in hardship did not reach out for support from lenders because they were unsure about how it would impact their credit report, and over half who missed a credit repayment did so because of everyday financial pressures.
Richard McMahon, general manager – government and regulatory at Arca, said the current regulatory framework for credit reporting is “sound”, but “very limited compared to the rest of the world.”
He believes an expanded system that includes more data would help deliver better outcomes for borrowers.
“It contains less data, over shorter periods of time than is available in similar countries, and these limitations affect both lenders and consumers,” said McMahon.
“Making more data available supports financial inclusion, which will help more people secure loans that are right for them, while empowering lenders to expand their operations. It also improves competition in credit, which means better deals for consumers.”
McMahon said a better credit reporting system could reduce compliance friction for brokers by making more data readily available.
This would ease the burden of information gathering for brokers and speed up the lender decision-making process.
“Improving data availability would also allow lenders to simplify application processes and speed up decision times, which will, in turn, benefit brokers as they can expect quicker, more accurate responses to loan applicants, with fewer follow-ups,” McMahon explained.
McMahon said a modernised credit reporting framework would better support responsible lending.
“For example, at the moment consumers often have to provide account statements or other detailed information, which can be a hassle. Additionally, lenders often need to make assumptions about how much the consumer actually owes or what their regular repayments are,” McMahon said.
“Having this information available in the credit report system will make things easier for all parties and support quicker, more accurate decisions.
“Smooth, appropriate access to credit supports the functioning of the economy in that it allows people to invest in their future and spread out the cost of large purchases; and it also protects consumers and the wider economy from the costs of unaffordable loans.”
[Related: New data reveals borrowers are avoiding hardship assistance due to credit misconceptions]
