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Monday, 25 June 2018
Page: 6131


Mr MORRISON (CookTreasurer) (12:25): I appreciate the House's time in moving this matter fairly quickly through this chamber to enable this important reform to be dealt with in the Senate at the earliest possible opportunity. The bill will increase competition in the lending market by reducing the credit data advantage held by the major banks. This bill is about empowering customers and making banks more competitive, which is what our banking system needs. We're all very aware of the many challenges that exist in the banking and financial system. We also know that our banking and financial system is fundamentally strong. We do not have any financial stability risks associated with our banking system. It is one of the most resilient banking systems in the world; but, that said, we do want a banking system that is more accountable, more sustainable and more competitive.

This measure is designed to achieve, in particular, a greater competitiveness, a higher level of competition, in our banking and financial system. It will provide more Australians with better credit opportunities and enable credit providers to make more responsible lending decisions. It's a game changer for customers and it will lead to better deals on mortgages, personal loans and small business loans. Customers with good credit histories will be able to obtain lower rates and be better placed to shop around, because their credit history will now become available to all credit providers. Others, whose previous credit histories only included default rates, will also get a better chance to demonstrate their credit worthiness, because there will be more credit information available on their reliability. So, when they're trying to get back on the horse, they'll get recognition for doing just that. Many small-business owners will gain better and faster access to credit, allowing them to invest more in their growing businesses. The US, the UK and New Zealand already have strong comprehensive credit reporting regimes, and we need to catch up to the rest of the world when it comes to this area. We shouldn't be delaying it; we should be getting on with it.

While credit providers have had the ability to voluntarily share comprehensive credit information since 2014, the take-up has been poor. Industry has not been able to resolve a critical first-mover problem and the system has not created sufficient critical mass to incentivise small credit providers to participate in the credit reporting system. This bill resolves this problem by requiring the four major banks, who currently make up more than 80 per cent of all household lending, to participate fully in the CCR system. Under these reforms, the four major banks must supply 50 per cent of their comprehensive credit information to credit reporting bodies within 90 days from 1 July this year. The information on the remaining accounts, including those that open after 1 July 2018, must be supplied within 90 days from 1 July 2019. This information must be supplied to every eligible credit reporting body—that is, every credit reporting body that meets the standards under the Privacy Act and had a contract with the bank on 2 November 2017.

Whilst the bill limits the initial mandatory bulk supply to these three bodies, nothing in the bill prevents additional credit reporting bodies from entering into supply agreements with credit providers and competing with the established bodies. The government strongly supports competition in the credit reporting market. Following the initial supply of information, the four major banks must keep the information supplied accurate, complete and up to date, including by supplying information on subsequently opened accounts. At this point in time, the government does not propose to extend this mandate to the next tier of credit providers. We believe that the critical mass delivered by the major four banks will be sufficient. However, if participation is inadequate, the government could mandate certain credit providers through a regulation-making power in this bill.

The security of customer information is also our highest priority. Under these reforms, the Australian Information Commissioner will continue to have oversight over the management of Australian personal data, including credit information. Banks will continue to use their bilateral arrangements to perform audits and ensure that the credit-reporting bodies continue to upgrade their security systems to meet the changing threat environment.

In addition, this bill will strengthen the privacy and security provisions established under the Privacy Act. We are extending the security provisions under the Privacy Act to ensure that all credit-reporting bodies store their data in Australia or in a secure cloud service certified by the Australian Signals Directorate. We are requiring credit providers to satisfy themselves that a credit-reporting body is meeting reasonable security standards before they supply the mandatory credit information. The inclusion of these provisions follows extensive consultation with industry, consumer advocacy groups and security agencies and will allow Australians to rest easy, knowing that credit-reporting information is stored safely and securely.

Where credit providers and credit-reporting bodies are subject to requirements under the bill, they will be subject to penalties if they fail to comply. Enforcement of these requirements will be the responsibility of the Australian Securities and Investments Commission, ASIC, who will be granted the appropriate powers to collect information and require audits to confirm that these requirements are being met.

Credit providers and credit-reporting bodies will also be required to provide statements to the Treasurer in January of 2019 and 2020, certifying their compliance with the initial supply provisions of the bill. The mandatory-reporting regime recognises that industry stakeholders have already taken steps to support sharing comprehensive credit information. To the greatest extent possible, this bill allows industry participants to continue to benefit from the protections and principles embedded in the existing industry-established framework.

This bill also requires government to conduct a statutory review of its operation prior to 1 January 2022, with a written report to be tabled in parliament within 15 days of receipt. This will provide an opportunity to review whether the bill has met its objectives and whether legislation needs to be updated to adjust the scope or operation of the comprehensive credit-reporting system.

This bill is in response to the recommendations made both by the Financial System Inquiry and in the Productivity Commission's inquiry into data availability and use. It is time to move forward with this. There have been the reviews. There have been the consultations. The model has been worked up. There has been the opportunity for industry to adopt this independently. We have done all this; it's now time to get on with it and to ensure that customers get the best possible deal in this country from the banking and financial system. This is a further tool that they will have. This is a further armoury for them, to ensure that customers in our banking and financial system are empowered with their own information, their own data, and that we take advantage of the significant revolutions that are taking place with respect to data as a source of value for customers to be used to ensure that they can get the best services and the best financial products that are available to them.

The bill will improve the operation of our lending markets. It will improve competition, and it will reduce the credit data asymmetry between the four major banks and the smaller lenders. There have been enough excuses for not moving ahead with this in the past, and the time for excuses on moving ahead with this has now also ended. It's imperative for us to move forward with these important reforms, as we are in so many areas in the banking and financial system. For that reason, I commend the bill to the House.

Question agreed to.

Bill read a second time.