Changes to the Privacy Act to benefit small business owners

The Privacy Amendment (Enhancing Privacy Protection) Bill 2012 has passed Parliament, with implications for SMEs, consumers, credit providers and the economy.

Under the new system, additional information will be able to be listed on consumer credit reports, including account payment information prior to default.  Previously, a credit report could only include identity details, credit enquiries and negative data such as defaults, court judgments and bankruptcies.

Current data elements:

  • Personal identification details (e.g. full name, date of birth)
  • Defaults (debts that are more than 60 days overdue)
  • Bankruptcies
  • Credit enquiries
  • Court judgments

New data elements:

  • Credit account information (e.g. account status, open and/or closed date, credit limit)
  • Type of credit and account (e.g. credit card and revolving credit)
  • Up to 24 months of repayment history information (e.g. payment obligation has been met or not)
  • Credit provider details

A recent quantitative study  conducted by Dun & Bradstreet with the Policy & Economic Research Council (PERC), one of the world's foremost experts on credit information and economic development, examined the impact of these reforms. The study, which utilised credit data from 1.8 million Australians, revealed that more data on credit reports will:

  • create growth in lending to the private sector;
  • make lending fairer and significantly improve credit distribution and access in Australia;
  • improve access to credit for small businesses; and
  • help lenders mitigate risk.

According to Stephen Koukoulas, Dun & Bradstreet's Economic Advisor, this significant and important reform will have benefits for small businesses, consumers and the economy as a whole.

"Small businesses will be a big winner from the new reforms because of the additional information that becomes available on business owners - this information can turn small business owners from credit 'invisible' to credit worthy," said Mr Koukoulas.

"In addition, D&B's research indicates that credit acceptances could increase by 27 percent, while bad loans could fall by up to 45 percent, demonstrating the benefits to both consumers and lenders.

"For the economy as a whole, analysis indicates that economic benefits from this type of system could equate to $5.3 billion in net present value terms over a ten year period. At a time when the global economy continues to face challenges, this type of uplift for the local economy is undoubtedly welcome."

According to Gareth Jones, Dun & Bradstreet's CEO, this change has the potential to significantly benefit those that pay their credit obligations on time.

"Prior to today, Australia was one of the two remaining developed countries in the world to conduct lending in a 'negative' data environment where credit providers only had access to adverse payment information such as defaults or bankruptcies," said Mr Jones.

"This important reform will permit financial institutions to record whether people are paying their financial commitments on time, allowing on-time payers to demonstrate their positive financial performance. It will also allow those with a previous credit slip up to demonstrate that they have rectified their situation, thus giving them better access to affordable, mainstream credit.

"However, those that have a history of paying delinquently will be evident to credit providers, which means it's more important than ever for individuals to pay attention to their credit obligations and ensure they keep a close eye on their credit record."


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