The Privacy Commissioner proposes to give credit reporting agencies the right to keep records of all personal loans and repayments, not just arrears and defaults. Should we be worried?
Credit reporting firms have been pressing the commissioner for this right ever since their industry was regulated in 2004 by a privacy code that acknowledged the need for credit checks. It permitted them to collect and sell only "negative" information that would warn lenders and credit providers when someone was a credit risk. The industry maintains that everyone would be better served if it could provide positive information too.
It contends that a complete credit history would encourage more responsible lending and provide cheaper credit for those with a record of meeting their commitments and making payments on time. Lenders would be able to assess not only somebody's ability to pay but their previous willingness to pay. Sound business and customers would get easier credit, capital would be better employed, activity would be stimulated, the economy would be stronger.
Sceptics will wonder whether the industry's motives are entirely selfless. A complete record of everyone's borrowings and payments could provide data of untold commercial value to all sorts of potential customers of the credit reporting agencies.
The Privacy Commissioner says the code will allow the records to be available only to "credit providers", which appears to mean any business providing customers with credit in any form.
But commercial benefit, of itself, is no reason to restrict the supply of personal information. Critics of the proposed amendment to the Credit Reporting Privacy Code have been obliged to find some harm that could be done from full credit reporting, and they cannot. The Council for Civil Liberties maintains that individuals would not be aware of the information stored about them and would be unable to challenge it. That is more of a concern about negative information that is already kept rather than the balance this proposal should provide.
The draft amendment is supported for exactly that reason by the Federation of Family Budgeting Services. Credit providers will be given the whole picture rather than a record of missed payments that might have been temporary or rare. Budgeting services claim people are being forced to pay high interest to fringe lenders because mainstream financiers have been put off by a one-sided report.
The proposed change to the code is not entirely permissive. The commissioner, Marie Shroff, says she has tried to ensure it will benefit individuals and the community as well as business interests.
Her draft code will prohibit the listing of defaults of less than $100 and allow repayment information to be stored for only two years. That period seems too short. Credit providers have a legitimate interest in looking much further back than two years to assess an applicant's reliability.
Privacy is an elusive concept in the age of the internet. Young people put all sorts of personal information on sites that are far from private. If the commissioner is looking for a guide to the commercial information people are willing to share she could consult online auction sites where buyers and sellers willingly report on each other's performance.
Generally, personal information should be public knowledge if the loss of privacy is outweighed by its benefit to others. It is hard to see that any harm could come from the sharing of complete credit records. Borrowers with sound records have nothing to lose and much to gain.