Customers with good credit histories are set to be rewarded with cheaper interest rates following the introduction of ‘game-changing’ legislation.
Australia’s four big banks will be forced to share more detailed data on their customers’ credit histories after Treasurer Scott Morrison introduced Comprehensive Credit Reporting (CCR) on Thursday.
The legislation – which will apply to Commonwealth Bank, Westpac, ANZ and NAB from July – will force the banks to start sharing their customers’ ‘positive’ credit information.
Mr Morrison said the credit reporting regime will allow the banks’ smaller competitors to offer cheaper loans based on the more detailed information, Sydney Morning Herald reported.
Customers with good credit histories are set to be rewarded with cheaper interest rates following the introduction of ‘game-changing’ legislation (stock image)
Australia’s four big banks will be forced to share more detailed data on their customers’ credit histories
Treasurer Scott Morrison (left) introduced the credit reporting regime on Thursday
‘Customers with good credit histories will be able to obtain lower rates, and be better placed to shop around because their credit history will now become available to all lenders,’ he said in a statement.
The policy has been voluntary in recent years, but received underwhelming industry participation.
Banks previously only provided ‘negative’ information on credit reports, including if customers have ever defaulted.
As of July, the banks will be forced to share positive information, such as how frequently customers pay their bills on time.
Mr Morrison said it will give customers a chance to demonstrate their ‘creditworthiness’.
Mr Morrison said the credit reporting regime will allow the big banks’ (stock image) smaller competitors to offer cheaper loans based on the more detailed information provided
He added: ‘The new credit reporting rules will help open up the lending market to competition by allowing new lenders entering the market to better assess credit risk, meet responsible lending obligations and at the same time reduce exposure to defaults.’
Banks will face penalties of $2.1million if they fail to comply, the publication reported.
Half of their CCR data must be turned in by July, and 100 per cent by mid-2019.
The four big banks have volunteered to participate but have lobbied for the policy to also apply to their smaller competitors.
Mr Morrison said they would be offered ‘strong commercial incentives’ to participate, and the bill will open the door to force them to provide the data in the future.