Australia has lagged behind the rest of the developed world, with countries like the UK, USA and New Zealand already benefiting from positive credit reporting information.
Comprehensive Credit Reporting (CCR) is providing an opportunity for more responsible banking processes in Australia.
In 2014, the Financial System Inquiry determined that CCR needed to be integrated into Australia’s consumer credit and credit reporting information, as a systemic positive credit information sharing mechanism.
Its function is to enable credit providers to make more informed credit decisions by sharing positive repayment history information about their customers.
In order to facilitate the introduction of CCR, the Australian Retail Credit Association (ARCA) acted as the intermediary for industry bodies to consult and create what are now the Principles of Reciprocity and Data Exchange (PRDE).
Bringing an industry together
The PRDE is a set of rules for CCR participants to follow throughout the process of exchanging their data with bureaus and other industry bodies. These rules apply strictly to consumer credit information sharing.
They exist to create a clear standard for the management, treatment and acceptance of credit-related information shared amongst signatories to the PRDE.
PRDE participation is split into two different groups: the signatories and non-signatories.
- Signatories have access to all available CCR data, whether contributed by a PRDE signatory or non-signatory.
- Non-signatories only have access to CCR data provided by other non-signatories.
In order to gain access to the extensive dataset, you must be a signatory of the PRDE and adhere to its six principles.
The obligations under PRDE are binding and enforceable upon each signatory. Essentially the industry bodies, who are signatories, accept their responsibility to the PRDE requirements and submit to the body’s authority to enforce.
Establishing the requirement to be a signatory of the PRDE in order to share and access consumer credit liability information and repayment history information with other PRDE signatories.
Outlines the requirement for service agreements between PRDE signatories to contain and adhere to reciprocity and Australian Credit Reporting Standards.
Principle 4:All signatories must agree to adopt transition rules which exist to support early adoption of partial and comprehensive data exchange.
PRDE signatories must submit to monitoring, reporting and compliance requirements by the PRDE governing body.
The commitment to complete a broad review of the current PRDE within a three year period to ensure the principles work to bolster effective CCR incorporation.
PRDE’s role in a successful CCR financial system
The PRDE is an industry-led initiative that serves to ensure interests are conciliated and that CCR strengthens responsible lending practices.
The PRDE is covered by three values:
- Reciprocity: The system ensures a credit provider signatory only receives the same type of information that they supply to the greater pool of credit reporting data. This creates an incentive for credit providers to participate in CCR, making a more effective positive credit reporting system.
- Consistency: The system creates a level of consistent data supply between credit providers and credit reporting bodies who adhere to the Australian Credit Reporting Standards.
- Enforceability: The system’s compliance structure bolsters signatories’ confidence in the system itself, thus adding legitimacy to the PRDE and CCR frameworks/regimes etc in Australia.
As CCR grows in support, and with more credit providers becoming signatories to the PRDE, the quality of Australian credit information rise, giving way to a more extensive and robust credit reporting system.
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