GOVERNMENT TO INTRODUCE “POSITIVE” CREDIT REPORTING

Responsible lending under the proposed National Consumer Credit Protection Bill 2009 (NCCP) is designed to ensure that consumers are not provided or suggested unsuitable credit for their circumstances.

In early October, Senator Joe Ludwig, Special Minister of State, announced proposed reforms to the Privacy Act and Regulations. An exposure draft of the legislation will not be available until early 2010

The proposed reforms introduce “positive” credit reporting.

Introduction of five “positive” datasets in an individual’s credit report file would enable a more comprehensive assessment of a person’s credit risk. The “positive” datasets are:

1/ type of each credit account opened (e.g. mortgage, credit card, personal loan);

2/ date on which each credit account was opened;

3/ current limit of each open credit account;

4/ date on which each credit account was closed;

5/ credit repayment history, which will include whether in the past two years the individual has met repayment obligations.

Until responsible lending obligations under the NCCP Bill begin in January, 2011, credit repayment history data won’t be available.

However, repayment history may be reported from April 2010.

At the moment credit reporting is “negative”, therefore more limited, eg, it only includes information about any applications for credit and overdue accounts (defaults) etc.

For credit providers, the changes should mean there is more information available for the assessment of a consumer’s financial situation and thus meet responsible lending obligations. However, it may also mean some consumers are refused credit or are offered less.

The above is information only, which is based on a draft of the legislation. It is for general information only and should not be relied on as specific advice for your particular circumstances or as a substitute for professional advice.

Are Low Doc Loans still available without BAS? Yes. As the major banks have tightened their credit policy in regards to Low Doc Loans, it is true that they have become more expensive. The question is how much more? We are already starting to see some evidence of Low Doc Loans without BAS being quoted at high rates.

However, Low Doc loans without BAS are still available at or near home loan rates. If you are being quoted an investment interest rate that doesn’t begin with 5. something percent you may be paying too much. Generally, to purchase at the 80% mark, you will need clean credit, be registered for GST, it is preferable to have an ABN that has been registered for at least 2 years, and the residential property should be in a major area.

Of course all of the low doc loans applications are subject to a particular lender’s credit criteria.