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, were 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, theyll 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.
Thats 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 youve been honest on your application form, and gain confidence that youll 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 cant be collected or included in a credit report, including someones political or religious beliefs, race, medical history, sexual preferences, criminal record or reputation.
The Australian Law Reform Commission recently conducted a review of Australias privacy laws, making several recommendations about credit reporting.
Theyve 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 theyve recommended including a persons repayment performance history over the last 2 years (eg. whether theyve been meeting their repayments on all their credit accounts, how many times theyve been late, etc.) The information would be deleted 2 years after an account is closed.
Theyve 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 its 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 youre generally only told when a credit application is refused due to a credit report.
Federal Parliament will debate the proposals early next year.