Background
In March 2014 the Privacy Act 1988 was amended to allow for the exchange of comprehensive credit information.
• Defaults
• Payment Information
• New Arrangement
Information
• Judgements
• Court proceedings
• Personal insolvency
information
• Serious credit
infringements
Negative
Negative
Partial
Consumer Credit Liability
Information • type of consumer credit
• credit limit
• credit start and end dates
• credit provider details
• credit terms & conditions
Negative
Comprehensive*
Consumer Credit Liability
Information
Repayment History
Information*• if a payment is due
• payment due date
• payment date if late payment
What’s the problem?
Comprehensive credit reporting reforms enable more credit information in the system
However, without rules governing the exchange of this information, many organisations won’t participate
“CR is voluntary and the Inquiry
understands that, to date, none of the
major banks have participated.
This is likely because the cost of
sharing their information with
competitors is greater than the benefit
of gaining access to other competitors’
databases.” FSI – Interim Report 2-18
More information is valuable: it enables better risk management and better
credit decisions
What’s the problem?
There is a risk in allowing a competitor access to more information about
an organisation’s customers, and could therefore threaten this customer
base
What’s the solution?
Reciprocity is one
of the human rocks
on which societies
are built.
Marcel Mauss
What’s the solution?What’s the solution?
The most efficient teams, firms, and societies are often those where reciprocities are the most developed.
What’s the solution?What’s the solution?
• Society has developed various
types of reciprocities among
communities, organisations and,
industries, and
• social anthropologists have
identified that reciprocities in
society are pervasive and
necessary, having regard to the
overall quality of a society, of
relations in it, and of its members
themselves.
What’s the solution?What’s the solution?
Reciprocity is the only alternative to
oppressive command, regulation and
selfish exchange.
RECIPROCITY:
ITS SCOPE, RATIONALES, AND CONSEQUENCES
Serge-Christophe KOLM
What’s the solution?
• Data will be shared on the
principle that subscribers
receive the same credit
performance level data that
they contribute, and should
contribute all such data
available.
What’s the solution?
• Reciprocity is a key principle for credit
data sharing.
• A creditor could accept sharing its
information and break its information
monopoly if it gains access to the
information of other creditors and, thus, be
able to perform a better credit risk assessment and
thus use his resources more efficiently.
• The reciprocity principle is enforced in credit
registers through provisions that ensure that
access to credit data is granted only to
those who contribute with their
information.
What’s the solution?
• Reciprocity is the fundamental
guideline and should be embedded
in all credit reporting systems to
ensure that data is accessed only
by those creditors that report the
same type of data to the credit
register, save a few exceptions.
What’s the solution?
To the extent that the National
Credit Act requires all credit
providers to do an affordability
assessment and an assessment of
past debt repayment history prior
to entering into credit agreements,
it implies compulsory consumer
credit information sharing among
all lenders.
Rules of reciprocity mean you only get back what you put in
Data standards improve the exchange and reduce the cost of business
Reciprocity is about providing a guarantee to organisations exchanging
comprehensive credit information: they get back what they put in.
This means that everyone shares the benefit of more information, yet
everyone contributing data creates a level playing field.
Implementing a data standard enhances the exchange: the same types
of information look the same, regardless of their source. This means
organisations can readily use data, and there are no added costs of
data interpretation
What’s the solution?What’s the solution?
Build trust and confidence in the credit reporting system for all users
• Strengthen and support the reciprocity arrangements that currently exist in bilateral contracts between credit providers and credit reporting bodies
• Introduce a new data exchange standard for the credit reporting system that will help improve accuracy and completeness
• Create a tiered system of exchange – negative, partial and full comprehensive
Create a clear industry standard for the management, treatment and
acceptance of credit related information
What’s the solution?
PRDE Principles
Principle 1:
PRDE to be binding & enforceable for signatories
Principle 2:
To exchange CCLI and RHI, must be a signatory
Principle 3:
Service agreements will require reciprocity and
use of the data standard
PRDE Principles
Principle 4:
Transition rules will encourage early adoption of
comprehensive reporting
Principle 5:
Monitoring, reporting & compliance
Principle 6:
Review of the PRDE
Principle 1: Binding & Effective
• All negative data is available to non signatories
• Use of deed poll as a means to bind signatories
• Bound to only exchange information at the
nominated Tier Level (negative, partial or
comprehensive)
• CP able to nominate a Designated Entity
• Specific exceptions will be set out in PRDE
Principle 2: CCLI and RHI
• Must be a PRDE signatory to be supplied or
contribute CCLI and/or RHI
• Means by which exchange of ‘new data’ is
governed
• A CP is restricted from on-supplying CCLI and
RHI to a non-signatory
• Exception for Securitisation Entities
Principle 3: Data standards
• Both CPs and CRBs are required to adhere to
the data standards
• CRBs can provide a conversion service
• A CP is not restricted from contributing
information to multiple CRBs
Principle 4: Transition rules
• CP must provide 50% of Tier Level, before
obtaining first supply
• Remaining 50% of information at Tier Level to
be provided within 12 months
• RHI contribution requires 3 months of data as a
show of goodwill
• Tier Level contribution can be concurrent
Principle 5: Monitoring, reporting & compliance
• Compliance outcomes are reached through a
process that encourages
– Negotiation
– Mediation
– Conciliation
• PRDE Administrator Entity facilitates process –
maintains register & signatory website
Principle 6: Review
• Independent review of PRDE initially at 3 years,
afterwards 5 years, process managed by PRDE
Administrator Entity
• CPs and CRBs required to assist review in good
faith
Next Steps
ACCC authorisation
As the new arrangements will impose particular
obligations on the way PRDE signatories
exchange data with others, ARCA will approach
the ACCC to make sure the new arrangements
are appropriately authorised….
Next Steps
“the likely public benefits flowing from the
proposed conduct for which authorisation is
sought outweigh the likely public detriments
flowing from that conduct”
More information
www.creditsmart.org.au
www.arca.asn.au