Credit firms eye privacy changes

Credit-reporting firms are pushing for a privacy law change to collect more information on New Zealanders seeking finance.

The privacy commissioner's office is reviewing the proposal as part of a wider review of credit reporting in New Zealand, but an academic says it could force more Kiwis to turn to loan sharks for finance.

Credit-reporting firms use information such as how often a person has applied for credit and whether they have defaulted to generate reports on an applicant's credit-worthiness.

The law change would allow them to collect more information, such as how many accounts people have and their credit limits.

Auckland University Business School senior lecturer Gehan Gunasekara said if credit-reporting firms were allowed to collect more information, some Kiwis could find it impossible to get credit from any reputable lender.

"Once they [lenders] have full access to information, they can look at a person and say: `They've borrowed up to their limit so they're a credit risk'. But there's always someone who'll lend to those people they'll get shipped down the list to the loan sharks."

Loan sharks typically aim for people with poor credit ratings and charge exorbitant interest rates.

Mr Gunasekara said the US had introduced a comprehensive credit regime and many people had been forced to seek finance from loan sharks.

"The sub-prime mortgage crisis was brought about by people who were quite desperate and forced to over-extend themselves."

Credit-reporting companies accessing and sharing more information would raise privacy concerns.

"Each of the facts collected about you on their own are not serious, but there's a privacy concern when you link them all together.

"Privacy could be chipped away at over time."

John Roberts, managing director of credit-reporting firm Veda Advantage, said the more information a lender had, the more accurately they could calculate risk and tailor credit by adjusting interest rates, for example.

"What happens when you have more full reporting is you see a person's true picture and can give them access to more quality credit." Veda will introduce a scoring system next week giving credit applicants a score between 330 and +1000 to indicate how credit-worthy they are.

Federation of Family Budgeting Services chief executive Raewyn Fox said Veda's new scoring system would raise awareness about credit ratings.

It would provide a more complete view of a person's creditworthiness, she said.

"One of the concerns we've had is that people do the wrong thing once, they don't pay one debt, and that goes against them. A lot of the time people are pushed into situations outside their control.

"The [Veda] system looks at a person's whole record, so they might not be quite so disadvantaged and can get reasonable credit."

- © Fairfax NZ News