Applying for credit – how privacy laws affect you
No one wants their personal information accessible to any Tom, Dick or Harry. Thankfully, we have privacy laws that offer some protection. When it comes to applying for consumer credit though, we’re all subject to checks.
Before a credit provider (eg. a bank, finance company or retail business offering credit) decides whether to approve you for credit or a loan, they’ll often seek information from a credit reporting agency. Reporting agencies gather public information – such as court judgements or bankruptcy orders, and private information – like whether you have any overdue payments, and your credit history with other providers.
That’s all legal, as long as the information is supplied according to the rules in the Privacy Act. Federal regulations cover the collection, use and disclosure of personal information concerning credit to be used for domestic, family or household purposes.
The idea of course is for lenders to check you’ve been honest on your application form, and gain confidence that you’ll pay your credit bill.
By law, credit reporting agencies can only use the information in their databases for consumer credit purposes – not for any other reason. If an agency or credit provider intentionally breaks the disclosure rules they can be fined up to $150,000. In some circumstances, credit providers can disclose personal information to others, like a guarantor on your loan (you must agree).
Some personal information can’t be collected or included in a credit report, including someone’s political or religious beliefs, race, medical history, sexual preferences, criminal record or reputation.
The Australian Law Reform Commission recently conducted a review of Australia’s privacy laws, making several recommendations about credit reporting.
They’ve proposed extending the personal information that can be collected and disclosed. Currently, the focus is on “negative” information, like when someone has defaulted on a loan. But they’ve recommended including a person’s repayment performance history over the last two years (eg whether they’ve been meeting their repayments on all their credit accounts, how many times they’ve been late, etc.) The information would be deleted two years after an account is closed.
They’ve also recommended that information about dishonoured cheques no longer be included in credit reports, and that only overdue payments above a minimum amount be reported. (Currently any small debt can be included, provided it’s at least 60 days overdue and the provider has tried to recover it). That minimum figure still needs to be debated.
Another recommendation is that credit providers notify you before or when information about you is given to a reporting agency, and in particular, before overdue payment information is disclosed. Currently you’re generally only told when a credit application is refused due to a credit report.
Federal Parliament will debate the proposals early next year.