Consumer Credit
Financial hardship information included in credit reporting from July 2022 By Michael Blyth*
All credit professionals need to understand and prepare for these changes which not only require compliance with new legislation, but also significantly impact how you engage with your customers.
What’s changing
Michael Blyth
Currently, financial hardship arrangements cannot be reported in the credit reporting system. As such, a consumer’s credit report might show that they’ve missed repayments during a hardship arrangement, even if those missed or reduced payments were agreed as part of a financial hardship arrangement with their lender. Alternatively, some lenders might cease reporting a customer’s repayment history during a financial hardship arrangement – this approach results in ‘blank’ repayment history. Both approaches don’t tell the full story about the consumer. From 1 July, the credit reporting system will be much clearer, with the introduction of “financial hardship information”. If a lender agrees as part of a financial hardship arrangement, that a customer may temporarily reduce their
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monthly repayments; provided the customer makes that reduced payment on time as agreed, their repayment history will show that they are ‘current and up to date’ with payments for that month. In addition, the credit report will show a “flag” alongside that month’s repayment history information, indicating that a special payment arrangement was in place for that month. In the credit report this will be referred to as “financial hardship information”. Monthly repayment history information is being reported for more than 95% of all regulated consumer credit accounts in Australia. More than 70 lenders contribute and access repayment history through the credit reporting system. All credit professionals need to consider what these hardship reporting changes mean for them. Three important issues to consider are: z For lenders that currently report repayment history, or intend to move to comprehensive credit reporting: when do I need to report financial hardship information, and how do I do it? z For credit professionals that access credit reporting
