Sometimes, very occasionally, the industry can be transformed overnight. Following America’s example, Scott Morrison recently announced the Government will force the major banks to share customer data (CCR) , starting just eight months from now. The decision hasn’t come easily; Scott Morrison has ended a fight that has lasted more than three years. Currently, less than 1% of customer data is being shared. By July 2018 the major banks will need to share 50% of their data and by July 2019 a full 100%.
What are the key changes?
Lenders will share not only negative credit data but all data about borrowers with the intention to help smaller and data-driven lenders to make smarter decisions.
This is only impacting major banks however non-major banks and potentially non-bank lenders are expected to also share the responsibility shortly after full implementation in July 2019
What are there benefits in baring all?
Well, one thing for sure is predicted - if you’re deemed a responsible borrower; that is, pay all your repayments on time, Morrison has predicted “this regime should lead to one thing – a better deal on your mortgage, your personal loan or business loan”. Further, Suncorp’s CEO of banking and wealth, David Carter, stated “We should be able to make the origination process quicker, and at some point we should be able to offer differentiated pricing.”
We already see this sort of differentiated pricing in the market, whereby lenders often enforce higher interest rates for customer’s that are deemed a higher risk. This is also evident in the area of interest-only loans.
On the other hand, the introduction of CCR is also a challenge for some Australian borrowers. With banks having full access to your repayment history, including that of credit cards, there’s nowhere to hide for borrowers who are genuinely risky or have missed a payment. As the Consumer Action Law Centre puts it, “the flip side to lower fees and interest rates for some is that costs will increase for others. These ‘others’ will undoubtedly be Australia’s most vulnerable, disadvantaged and financially stressed households”. Going forward, lenders will be able to “profile for profit”, the Consumer Action Law Centre explains, raising rates not only for genuinely risky borrowers but any they consider undesirable. Consequently, as Suncorp boss Carter says, “all borrowers won’t be equal; they’ll be less equal under comprehensive credit reporting”.
Opportunities and challenges aside, what we do know for sure, when changes come into effect, is the great opportunity many of our clients will have to negotiate lower interest rates.