New rules affecting what can be reported about your credit history and repayments will apply from 1 April 2012. Privacy Commissioner Marie Shroff today announced changes to credit reporting law that will affect almost all adult New Zealanders. The changes mark the start of a new more comprehensive credit reporting regime for New Zealand.
In six months time, whether people pay their bills when due and whether they meet their monthly repayments will be recorded by banks and credit providers and uploaded to credit reporters' databases.
"April next year will bring in some significant change for most of us. The key thing is that your monthly credit repayments will be stored by credit reporters. So, there'll be a lot more information about each of us gradually building up over time. This should help to give lenders a much better picture of how likely we are to be able to repay a loan," Ms Shroff said.
"There are some obvious downsides - we're all giving up more financial information about ourselves but, overall, we can expect to see some benefits. There is a strong economic case that giving lenders more information of this sort will support more responsible lending," said Ms Shroff.
"Credit reporting is an area that involves some fine balances. We want to ensure people can get credit at a reasonable price when they need it, and also that lenders have enough information to be able to make sound, responsible, lending decisions.
"When we reviewed the Credit Reporting Privacy Code 2004, lenders told us that they would be able to price loans more competitively - on the basis of risk - if they had more information about a borrower's payment history. There is overseas evidence that gives support to this argument.
"We would also expect to see a wider range of people being able to access mainstream credit as a result of these changes, rather than having to turn to fringe lenders or loan sharks. We will be watching the industry closely to see if these expected benefits do in fact materialise," Ms Shroff said.
"This is an important issue for individuals, businesses and the economy as a whole. People want credit approved quickly and easily and credit providers are expected to make fast but robust credit decisions. More comprehensive credit reporting should bring benefits for consumers as well as the industry, by promoting competition and allowing for better lending decisions," said Ms Shroff.
"We had input from the public and the credit industry in the submissions and public hearings and I've listened to a range of views on whether these changes should proceed. Having studied the overseas evidence and listened carefully to the arguments, I am convinced that there is a case to allow more comprehensive reporting," Ms Shroff said.
Educating people about how a comprehensive credit reporting system works will be vital, Ms Shroff stressed. She noted that the industry had a key role to play in educating the public and promoting a responsible lending culture.
"This represents a big change for people and they need to understand the way the new system will work," Ms Shroff noted. A new Summary of Rights is available and has been translated into three languages.
Credit reporters will be required to give an assurance report each year to the Privacy Commissioner confirming that they have complied with the law set out in the Credit Reporting Privacy Code.
From next year, people will also be able to have their credit reports suppressed, or "frozen", if they are at special risk of fraud.
This will make it harder for fraudsters to obtain credit accounts in someone else's name because it will stop a credit report being given out once the information is suppressed.
"This new tool will limit the real financial harm that can result from identity fraud and help people to protect themselves," said Ms Shroff.
Some changes to the code made in December 2010 have just taken effect on 1 October 2011. Credit reporters can now collect and use the driver licence number to better match credit information - ensuring that the right information is reported about the right person.
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