The major banks have agreed to share customers’ repayment history with each other in a landmark deal aimed at improving customer credit quality assessments.
The data-sharing agreement comes after scrutiny from the banking royal commission, which criticized the major banks for making loans using estimates rather than real data.
In response, the big four will sign on to the comprehensive credit reporting regime.
Customers will no longer have anywhere to hide when switching banks, the regime will mean the new bank can bring up a report showing the full repayment history of all accounts held at other banks.
The new arrangement will certainly give the banks a more complete picture of a customer’s total debt situation.
Credit card data will be the first to be put into the system, with mortgage and personal loan data to be added within the next 12 months.
Mike Laing from the Australian Retail Credit Association said the data sharing deal was overdue.
“We have got critical mass,” he told the Australian Financial Review.
“This has been a long time coming.”
“Australia has had a negative credit reporting system for more than 50 years. But come the end of the month, that is dead and we have started to play in the new era for credit reporting.”
The move puts pressure on the smaller banks and lenders to follow suit or they will likely be hit with a flood of loan applications from poor-quality customers shut out from the majors.
Up until this point, customer credit histories have only shown when a customer has been rejected for credit, not the actual detailed repayment history.
That has put Australia out of line with many other countries and reduced the prudential stability of banks.
That all changes with this new data sharing agreement.