Yes, you read correctly.

The Office of the Australian Information Commissioner (OAIC) has recently advised that, when disclosing payment information for a default, the only permitted payment information is that the default is ‘paid’.

This means that the credit report won’t distinguish between defaults that have been paid in full or settled in part. All defaults, whether paid or settled, will appear as ‘P’ (paid).

ARCA’s four credit reporting body Members (Compuscan, Equifax, Experian and illion) changed all of the entries of ‘S’ codes to ‘P’ codes between 11 and 15 February 2019.  

Who was notified of this change?

CRBs processed this change as a ‘correction’ to existing records. Corrections notifications were provided to the previous recipients of the credit reporting information (this is limited by paragraph 20.9 of the CR Code to other CRBs who have received the information previously, and also to CPs or affected information recipients who have received the information in the previous 3 months).

Customers were not required to be notified of this change. Each CP can, however, determine whether or not it wishes to advise its customers of the change. Information about this change was included in a blog post on the CreditSmart website (https://www.creditsmart.org.au/smart-blog/changes-to-how-paid-defaults-are-shown-on-credit-reports/).

What does it mean if I continue to disclose a default is settled?

CRBs are implementing processes so that ongoing disclosures of the ‘S’ code will be changed to the ‘P’ code (in the short term, this will be a manual process – and, in time, this will become an automated process).

However, because the disclosure of the ‘S’ code is now considered unlawful, we will need to ensure that CPs will eventually no longer be able to make this disclosure. ARCA will shortly be publishing a new Version of the Australian Credit Reporting Data Standard (ACRDS) which would remove the ‘S’ code as a Default Status. Once published, the implementation timeframe for this new Version could be as much as two years. Nonetheless, we would encourage CPs to update their systems well before this Version change takes effect.

Why has the OAIC only provided this view now? 

In mid-2018, a number of ARCA CP Members were the subject of systemic issue complaints by the then-Financial Ombudsman Service (FOS) due to the disclosure of the ‘S’ code. FOS had provided a view that such a practice was not lawful.

ARCA wrote to the OAIC seeking confirmation of the position, as well as arguing for the ongoing disclosure of both ‘S’ and ‘P’ codes. In response to this, the OAIC provided its view and sought confirmation as to how ARCA Members would address the issue.

What does this mean for new arrangement information?

ARCA’s view is that the wording of section 6S of the Privacy Act enables the differentiation between the circumstances of the new arrangement given it is defined as a ‘statement that those terms or conditions of the original consumer credit have been varied, or that the individual has been provided with the new consumer credit’.

At this stage, industry will continue to retain both the N and V codes as Default Statuses.

However, we do note that this distinction between payment information and new arrangement information has been confused within the CR Code, namely paragraph 10.1(d) which deems the disclosure of a new arrangement to be a type of payment information. In light of the OAIC’s view that all disclosures under 10.1 of the CR Code should reflect as a ‘P’ (paid) status, ARCA has proposed to remove 10.1(d) from the CR Code.

This proposed variation is included as part of the second tranche of variations to the CR Code, which will be submitted to the OAIC later in March 2019.

 

Elsa Markula

Legal & Regulatory Affairs Manager

ARCA

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