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If the National Consumer Credit Protection Bill 2009 will include responsible lending obligations, then according to The Australian Bankers' Association (ABA), more comprehensive credit reporting must be put in place at the same time.
David Bell and Ian Gilbert, respectively ABA's chief executive and director of retail regulatory policy, made this point to the Senate Economics Committee in Sydney.
The committee is inquiring into the National Consumer Credit Protection (NCCP) Bill 2009.
This NCCP bill implements a decision by the Council of Australian Governments to replace state-based legislation with a national regime for consumer credit regulation and oversight - including licensing and dispute resolution.
Low default rates demonstrate that banks have applied responsible consumer credit lending practices, but according to Bell, particularly in the case of credit card products there appeared to be "a lot of community misunderstanding".
"The practice of banks offering credit card limit increases to their existing customers is a case in point. These offers are made to customers who have shown an ongoing sound level of performance with their credit card," he said.
He added that comprehensive credit reporting would provide the option to access credit limits. However, that disclosure of credit balances would give the credit provider more information about customers' current levels of commitment.
In 2008, the Australian Law Reform Commission (ALRC) recommended that the current credit reporting regulation should be expanded to include a range of additional features.
The ALRC recognised that more comprehensive credit reporting could assist credit providers to practice responsible lending.
The ABA believes that the timing (for the introduction of more comprehensive credit reporting) should be aligned with the start of the responsible lending obligations for banks under the Bill in 2011.
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