Banks get ready to share credit info
Companies can now legally collect and swap information about missed and late payments of most household bills.
But no lender has started because the big banks and finance companies first in line to amass data are still wrangling a sharing deal.
The process is sufficiently sensitive that banks will not necessarily reveal to others in the industry exactly when they will start collecting information from customers.
Westpac, Kiwibank and finance company GE will be first off the rank.
A change in privacy rules on April 1 means someone's total available credit and any missed and late payments to banks, finance and utility companies can be collected and held for up to two years. A bad record could adversely affect the future ability to borrow, or even eventually obtain credit under mobile or utility contracts.
The credit industry lobbied strongly for the change. But no company wants to share details with its competitors without getting equally valuable information in return.
The data standards have been agreed but a reciprocity deal is still being discussed under the watch of umbrella group the Retail Credit Association.
RCA chief executive Justin Kerr said some lenders had the capability to share only partial information at the outset - for example on mortgages, loans, or credit cards. The question was whether that was acceptable to others.
"The question is whether companies can slide into it," he said.
"New Zealand has leapfrogged Australia on this but our major financial institutions are Australian-owned, so I imagine there is an interest in making sure any arrangements are acceptable to them."
John Scott of Dun and Bradstreet - one of the credit bureaus that will gather and load data on people's personal credit files - said there was a "huge amount of planning and expense" involved for companies to start storing information.
"People are probably wondering why it is taking so long but compared to overseas, this is a short time," Mr Scott said.
Payment data should start being shared late this year or in early 2013, but companies can gather histories before that.
That is because they can back-date the data until the date they notified customers that they would be collecting it, and Westpac, Kiwibank and finance company GE have already notified customers.
ANZ is planning to take part and ASB and BNZ have been considering it.
Telcos, power and insurance companies may join in further down the track.
The lending industry argued for the privacy change, saying it would extend mainstream credit to people who might otherwise have been forced to try loan sharks, and raise the credit performance of the country as a whole.
The Citizens Advice Bureau lobbied against it, pointing to research suggesting that either credit would be more widely available or the number of defaults would drop, but not both. A similar system was implicated in the broadening of lending that contributed to the American subprime crisis, CAB said.
Given sufficient competition a drop in the default rate should reduce the cost of unsecured borrowing by cutting the margin lenders build in for bad loans, but whether that eventuates is a moot point, banking commentators have said.
The change is likely to result in poor credit scores for some people who are now under the radar.
That is because at present only loans that go badly wrong are recorded on somebody's credit file.
The Privacy Commission has just completed a road show for budget advisers and staff of community law centres and Citizens' Advice Bureaus in preparation for the changes.
Individuals can request a free copy of their credit files at any time.
Need to Know Seven (non) deadly credit tips:
* Credit reporting helps credit providers decide whether to lend to you by gathering and sharing information about your behaviour.
* They can see how much you have borrowed and if you are making repayments on time.
* Power and phone companies also give credit. HPs and car finance count too.
* Your credit information changes all the time.
* It is free to check so do it regularly.
* You have the right to seek correction of your credit information.
* If you believe you are at risk of identity fraud (say if your wallet is stolen) ask credit reporters to "freeze" your records until the danger has passed.
* There is more than one credit reporter, so make sure you contact them all for access, corrections and freezing of records.
Source: The Privacy Commission brochure What you need to know about credit reporting.
- © Fairfax NZ News
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