As the Banking Royal Commission starts, the peak body representing Australia’s finance brokers has warned Treasurer Scott Morrison that draft legislation to force banks to hand over more detailed customer credit information will potentially backfire.
The treasurer, who last week introduced legislation mandating ‘comprehensive credit reporting’ (CCR), predicted that customers with a good credit history will be able to obtain lower interest rates, however executive director of the Finance Brokers Association of Australia (FBAA), Peter White, said there “is no chance in hell” this would happen.
“What will happen is that banks will maintain their current interest rate margins for customers with a better credit file, and increase the rates for those who have been through past difficulties under the guise of being of lesser quality or higher risk,” he explained.
“This normally impacts those who can least afford to pay higher interest rates, so it exacerbates their problems and helps no one.”
Mr White said CCR has played out badly in the USA where borrowers are punished for issues that happened 10 to 15 years ago.
“This is wrong, and we must be very cautious this doesn’t happen in Australia, as we will restrict access to debt for those who shouldn’t be restricted.
“Penalising people with higher interest rates is unfair and will lead to very poor consumer outcomes.”
The FBAA has urged Parliament to reject the legislation and says it will make its views known directly to the treasurer.