'Good' customers to get cheaper loans as banks fall into line

| 08.02,18. 03:43 PM |



'Good' customers to get cheaper loans as banks fall into line



Borrowers with good credit histories will be able to get cheaper loans after the government forced the big four banks to share more data on their customers' credit histories.


Treasurer Scott Morrison on Thursday introduced draft legislation mandating a system known as "comprehensive credit reporting"  (CCR) that will apply to Commonwealth Bank, Westpac, ANZ Bank and National Australia Bank from July.


Under the policy, which has been voluntary in recent years, and dogged by low rates of industry participation, banks will be required to hand over more detailed credit histories on their customers to credit bureaux.


Banks have previously only provided "negative" data for cutomers' credit reports, such as whether the borrower has defaulted. The new regime will require banks to also provide "positive" credit information, such as how frequently they have paid their bills on time.


Mr Morrison said forcing banks to share this more detailed information will be a "game-changer," as it will allow smaller competitors to offer sharper interest rates, because they will have a better idea of how risky prospective borrowers are.


"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 lenders," Mr Morrison said in a statement.


"Others, whose previous credit histories only included default rates, will also get a better chance to demonstrate their creditworthiness because there will be more credit information available on their reliability.


"The new credit reporting rules will help open up the lending market to competition by allowing new lenders entering the market to better assess credit risk, meet responsible lending obligations and at the same time reduce exposure to defaults."


The major banks have already volunteered to commit their data, but under the draft laws they will face penalties of $2.1 million if they do not comply. The banks will  need to hand over half of their CCR data by July this year, and 100 per cent of it by the middle of 2019.


The major banks have lobbied for the regime to also apply to their smaller rivals, but the new laws will initially only apply to the big four.


Mr Morrison said there would be "strong commercial incentives" for smaller lenders to also participate in the CCR regime, and the bill would include the power to require other lenders to provide data in the future if needed.


Comprehensive credit reporting has been backed by bodies including the Productivity Commission and Reserve Bank as one way of injecting greater competition into financial services.


However, consumer groups have raised concerns that the new regime could result in banks forcing lower-income customers to pay more for loans.

smh




(Votes: 0)

Other News

Grandmother killed by garbage truck while pushing grandson in pram in Dee Why Mortgage interest rate payments rise at fastest rate in 7 years despite no hike from the RBA in 16 month Sydney father dies after falling from Waterloo balcony during attempted arrest The MH370 search ship went 'dark', sparking theories it detoured to pick up a sunken chest British backpackers wake up trapped in floodwaters next to crocodile warning sign South Coogee cemetery crash: Man taken to hospital after car ploughs into tombstones The big problem with electric vehicle resale prices compared to petrol, diesel and hybrid cars The study found it took an average 13 years for a key worker to save for a home deposit in inner Sydney Taking antibiotics during pregnancy puts children at risk: researchers Woman rescued from floodwaters as wet weather continues across the Top End Truck driver charged over fatal seven-car crash near Dubbo ASIO takes custody of secret cabinet documents, obtained by the ABC House prices dragged down by Sydney property falls, says CoreLogic Message from His Excellency Bishop Antoine-Charbel Tarabay For the Feast of St Maroun and the Arrival of his Relics to Australia ASIO moves to secure classified cabinet files held in ABC offices in early morning operation Rudd's Labor was in 'fantasy land' over NBN investor interest, says Government Road rage attack with crowbar develops into high-speed chase though Sydney's M5 tunnel Statewide internet safety help for parents and children Commonwealth Bank involved in rigging key market interest rate, ASIC alleges A $1 tax on NSW Uber and taxi rides starts Thursday Scott Morrison tried to delay asylum seekers' permanent protection visas, documents reveal Homes evacuated as strong winds fan bushfires in Gidgegannup and Augusta Free-diver's body pulled from water in Botany Bay after fatal evening swim Childcare sector saturated, small businesses at risk say industry groups Codeine medications: Pain and gain when products pulled from shelves this week 'Don't take these drugs, they will kill you': Nine overdose at dance party Northern Territory monsoonal weather sees cars swept of roads by floodwaters Two people found dead in dam in tragic Australia Day drownings Yet another Uber customer has accused the company of a $150 ‘cleaning fee scam’ Invasion Day marked by thousands of protesters calling for equal rights, change the date