Credit reporting system denies NZers wealth
Friday 14 October 2005
Credit reporting system denies New Zealanders wealth
International expert on New Zealand's credit reporting system
Thousands of people are potentially denied access to the New Zealand dream of home ownership, while many others are provided access to credit they can't afford because of the country's restricted consumer credit reporting system.
These are the findings of international research presented today by Dr Michael Turner (PhD) from the Information Policy Institute in the United States, at an American Chamber of Commerce business lunch at the Stamford Hotel, Auckland.
International data shows that New Zealand would see a decrease in default rates and an increase in participation rates for demographics currently under-served, if legislators allowed even a small amount of additional information to be placed on a consumer's credit report. New Zealand is currently one of only three countries in the developed world that continues to operate on a negative reporting system.
This reporting system means that when assessing a credit application, a potential lender can only determine whether the applicant has lodged any other credit requests and whether the applicant has been delinquent on any payments in the last five to seven years. New Zealand legislation prohibits positive data on credit reports, such as account balances and timely payment history.
Dun & Bradstreet, a leading Australasian credit reporting agency, believes that some additional positive information, such as whether credit applications have been approved, should be allowed on credit reports and is seeking a Parliamentary Inquiry into the matter.
Dr Turner says that while arguments opposing reform are generally unproven, the data supporting the case for reform is substantial. That data includes:
- Dramatic reductions in delinquency and default rates
- Improved access to credit for those currently under-served - e.g. small business, young people with good payment histories, and women
- Macro-economic benefits such as less overall risk within the financial sector and a contribution to the national economy worth $5.3 billion over the next decade
"The international research is overwhelming. There are very real benefits to countries, developed and developing, from improving and reforming credit reporting systems and providing creditors with the necessary information with which to make responsible lending decisions," said Dr Turner.
David Christiansen, General Manager of D&B New Zealand, believes that the international experience shows that it is now time for New Zealand legislators to seriously examine this issue.
"D&B believes the case for reform is overwhelming. A decrease in default rates, improved access for people under-served and strong benefits to the nation's bottom line are all clear outcomes from a reformed credit reporting system," Mr Christiansen said.
"But we also acknowledge that there are some groups that still want to be convinced. We believe the best way to bring all the arguments together, and test them, is through a parliamentary inquiry." The speaking tour includes Sydney, Melbourne, Canberra, Brisbane and Auckland.
About D&B D&B is the world's leading provider of business-to-business credit, marketing and purchasing information, as well as receivables management services. In 2002, D&B opened a consumer credit bureau in Australia, introducing competition for the first time in this market. D&B is committed to providing Australia's most accurate and up-to-date consumer credit reporting solution. In addition, the company is committed to engaging decision-makers on the key issues underlying consumer credit reporting, including the criteria on which the industry makes credit available to consumers and the level of accountability in that system.