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Monday, 25 June 2018
Page: 6129


Mr THISTLETHWAITE (Kingsford Smith) (12:12): The National Consumer Credit Protection Amendment (Mandatory Comprehensive Credit Reporting) Bill 2018 would give effect to the mandating of a comprehensive credit reporting regime. Under this regime, large authorised deposit-taking institutions, or ADIs—basically the big banks in Australia—must then provide comprehensive credit information on credit accounts to certain credit-reporting bodies. This is a principle that Labor supports.

In government, we made changes to the Privacy Act to facilitate voluntary comprehensive credit reporting. This gave credit providers the permission but not the requirement to share comprehensive credit information on customers' accounts. That took effect in 2014. In the lead-up to the last election, Labor promised a policy of introducing mandatory comprehensive credit reporting, which was dependent on the outcome of a review. As such, Labor supports the principles that are covered by this bill. However, it doesn't mean that we're giving the government a 100 per cent tick for what they've done. I'm flagging that Labor intends to move in the Senate amendments relating to the elements of consumer repayment history information and when that would take effect because, at the moment, there's a review going on that is being conducted by the Attorney-General's Department. It is a review of financial hardship arrangements. We feel that it would be better if that review was completed and the government received the findings of that review and was able to respond accordingly to that review before some of the measures in this bill take effect. We'll move those technical amendments in the Senate only, and we'll not be moving any of those amendments in the House.

As part of this bill, the scheme is meant to commence from 1 July 2018, with large ADIs required to collect information on accounts from 1 April 2018. The intention is to allow credit providers to obtain a comprehensive view of consumers' financial situation, enabling a provider to better meet its responsible lending obligations. The government claims that this scheme will benefit consumers by providing better access to credit and more competitive rates depending on an individual's credit history. It's argued that consumers would be able to better show their creditworthiness when seeking to enter the housing market, for example, or undertake other personal loans. The regime applies to eligible licensees, which are large authorised deposit-taking institutions with total resident assets in excess of $100 billion. So, basically, we're talking about the bigger banking institutions in Australia that hold a credit licence also in this country. Other credit providers may be included as prescribed by regulation.

The supply of information under this scheme includes an initial bulk supply of information and an ongoing requirement to keep that information up to date and accurate. The initial bulk supply is split into two years, with information on 50 per cent of consumer credit accounts within the banking group to be supplied by 28 September 2018 to all credit-reporting bodies that the large ADIs had contracted with over the last few years, as at November 2017. Information on the remaining 50 per cent of accounts, including those accounts opened after 1 July 2018 and those held by subsidiaries to large ADIs, is to be supplied by 28 September 2019.

The information that is provided to credit-reporting agencies is defined as personal information other than sensitive information, and I think that's a pretty important issue to distinguish. We're not talking about some of the sensitive personal information here in relation to consumer credit accounts. We're talking about other information associated with a person's identity; default information in respect of previous attempts at credit and successes at credit; payment information; new arrangements information; consumer credit liability information; and repayment history information. The regime in this bill will significantly increase the sharing of consumer credit liability information and repayment history information. The security and privacy of that information is no doubt a concern for people, and that is to be preserved and protected, relying on the existing protections that are currently enshrined in the Privacy Act and the privacy code, as well as the oversight of the Australian Information Commissioner. So Australians can have every confidence that their privacy and their information will be preserved under existing legislation.

While the regime will not alter the existing provisions, there is a new obligation on credit-reporting bodies as to where and how data is stored. This data must be stored in Australia or with a service that is listed by the Australian Signals Directorate as being a certified cloud service or that meets the conditions of the privacy code. ASIC is to be given responsibility for monitoring the compliance of the banks and the mandatory comprehensive credit-reporting regime. There are civil and criminal penalties in this bill which can be sought by ASIC for noncompliance with the regime. However, the Office of the Australian Information Commissioner will remain responsible for the compliance of credit-reporting bodies with the Privacy Act, including the rights of consumers to free credit reports and to have incorrect information corrected. So, if consumers have any concerns about false or incorrect information being circulated by some of these bodies in respect of their credit history, there will be a mechanism for some form of correction of that information. The Treasurer will receive statements from large ADIs and credit-reporting bodies to show that the initial bulk supply requirements have been met. There's also a review mechanism under which the Treasurer must cause an independent review of the mandatory regime to be completed and a written report provided to Treasury by 1 January 2022. The Treasurer must table the report at each house of parliament within 15 days of receiving the report.

I'd like to make a couple of comments about the financial hardship arrangements review. It's noted that in March 2018 the Attorney-General separately announced that there would be a review of financial hardship arrangements. This was to include how the current financial hardship arrangements intersect with consumer credit reporting frameworks. The review is expected to be completed in late 2018. I'm not sure if one side of the government is talking to the other side, but the timing of this review has been poor given that this comprehensive credit reporting regime, which involves the issue of financial hardship arrangements via the repayment history information, is meant to start on 1 July this year. Views from the Senate inquiry into this bill are testament to the issue that this has caused for many working in the industry and the lack of understanding of what the government is actually up to here with this deadline and the starting date for this legislation. A variety of stakeholders, including consumer groups, banks and credit associations, have all expressed concerns that consumers would be disadvantaged if repayment history information was provided prior to the Attorney-General's review being completed.

The joint submission from the Financial Rights Legal Centre, the Consumer Action Law Centre, Financial Counselling Australia, the Australian Privacy Foundation and the Australian Communications Consumer Action Network stated that the government to date has not addressed problems with the way financial hardship is treated within the repayment history information. The Australian Banking Association in their submission stated:

Without an agreed resolution and legislative change, the credit standing of those customers who are unable to meet their repayment obligations due to financial hardship are likely to be detrimentally affected. They are likely to be lumped together with those customers who simply don't comply with their repayment obligations.

Ideally, if the completion of the Attorney-General's Department's review can be brought forward, this increases the probability of a fairer and more favourable outcome for consumers, banks and other credit providers in the credit reporting system, and with the transition of RHI within the mandatory CCR legislation to be preceded by a settlement.

The Australian Retail Credit Association also acknowledged that there would be problems with the timing of the commencement of the CCR and the Attorney-General's review, and the Financial Rights Legal Centre stated that consumers will be negatively impacted if the regime started prior to the Attorney-General's review being completed. They supported a one-year delay to allow that review to be completed.

So there is strong evidence here in terms of the review and the feedback from the industry, and we think it's perfectly reasonable that the supply of repayment history information be delayed until after the Attorney-General's review is complete and the government has responded to its recommendations.

There are also, understandably, issues around privacy. A significant amount of Australian consumer credit data will be stored in one place, which does raise issues about breaches of privacy. We saw in the United States in 2017 the now-infamous data breach involving Equifax, where up to 140 million Americans had personal and financial data exposed, and it's important we have a proper framework in place to deal with potential risks such as this in the future. During the Senate inquiry we did hear evidence from the ABA that provisions in the bill were sufficient assuming that the Office of the Australian Information Commissioner could fulfil its role in relation to privacy laws. We trust that the government has actually done its homework on this issue and will continue to review whether the provisions put in place offer sufficient protection to consumers' personal and financial data. The issue of the benefits of the regime was also raised in the Senate inquiry. Whilst there was a suggestion the regime would be used to boost profits rather than maximise consumer benefits, we will monitor this element closely to see if consumer benefits are actually increased and whether or not detriment does occur.

In summary, Labor support the principles that are covered by this bill, but we won't be giving the government a green light on this. We intend to flag, as I mentioned earlier, moving amendments that will delay elements of consumer repayment history information by one year in the Senate. This will allow for the Attorney-General's review of financial hardship arrangements to be completed and for the government to respond appropriately.