5 days left to have your say in Comprehensive Credit Reporting regulations

The Australian Government is currently seeking views on the exposure draft of the Mandatory Comprehensive Credit Reporting (MCCR) regulations. This consultation process will close on 13 June 2018.

This follows an announcement made on 2 November 2017 confirming that the Government would legislate MCCR as of 1 July 2018. All big 4 banks that currently hold approximately 95% market share of Australia’s finance industry, i.e. The Commonwealth Bank of Australia (CBA), the National Australia Bank (NAB), the Australia and New Zealand Banking Group (ANZ), and Westpac, are required to fully participate in this regime. All other banking institutions are to follow suit in 2020 after major banks have implemented open banking. 

 What is the purpose of the regulations proposed in the exposure draft?

  1. To exclude non-eligible credit accounts from being supplied within the mandatory regime;
  2. To specify any additional circumstances where ongoing reporting may be required under the mandatory regime;
  3. To restrict credit reporting bodies from disclosing protected information they have received or gathered through the mandatory regime;
  4. To set out the information that credit providers and credit reporting bodies must include in their statements to the Treasurer; and
  5. To provide scenarios where the Australian Securities and Investments Commission may issue an infringement notice for a civil penalty.

How is MCCR related to open banking?

MCCR is a core component of Australia’s emerging open banking regime. It has been designed to provide lenders with more information to enable them to better assess a borrower’s true credit position and ability to pay a loan. MCCR has also been prepared to increase competition between lenders in the credit market and will act in consumers’ advantage as they get to enjoy better deals on financial products.

As of 1 July 2018, MCCR will require the Big 4 banks to supply 50% of their consumer credit information to all credit reporting bodies they had an existing agreement with on 2 November 2017. This is to be done within 90 days of 1 July 2018. And within 90 days of 1 July 2019, the same banks would need to supply credit information on their remaining accounts to the same credit reporting bodies.

What is the aim of open banking?

Australia’s open banking movement follows similar regulations that have been implemented in Europe and the United Kingdom (UK).

In Europe, open banking has been instituted by two legislations:

  • The General Data Protection Regulation (GDPR) established on 25 May 2018 which sets out consumers’ rights in regards to their data; and
  • The Second Payments System Directive requesting banks to open up their data as of August 2019.

In the UK, open banking has been established by Competition and Markets Authority to encourage competitive offerings in the banking industry.

In contrast, Australia’s open banking framework is part of the new Consumer Data Right(CDR) and will allow individuals to access data held about them by businesses such as their banking, energy and phone transactions and also allow the transfer this information between accredited third parties. According to Deloitte’s Open banking: A seismic shift report, “the changes enabled by open banking and comprehensive credit reporting will have a significant impact for customers, data privacy and financial crime, strategy and pricing, conduct and fairness, artificial intelligence, and application programming interfaces (APIs)”. 

From PwC’s perspective, open banking is more than a compliance-focused exercise – Instead it will completely change how the finance industry operates. In the 2017 state budget, Scott Morrison, Treasurer of Australia, said that “the introduction of an open banking regime in 2018 will give customers greater access to their own data, empowering them to seek out better and cheaper services”.

Australia’s Fintech group also welcomed the open banking regime with its first phased of implementation taking place next year in July 2019. This initial phase expects that data retrieved from credit and debit cards, deposit and transaction accounts would be made available by July 2019. The Government also confirmed that all remaining product data, personal loans and mortgage data would be taken into account from July 2020 and would apply to both consumers and businesses.

How to respond to this consultation

You may submit your comments to this consultation until 13 June 2018. Submissions are required by email at [email protected]  or by post at:

Manager

Insurance and Financial System Unit

Financial System Division

The Treasury

Langton Crescent

PARKES ACT 2600

All information disclosed in submissions will be made available to the public on the Treasury website unless you indicate that you would prefer your submission or part of your submission to remain confidential.

For further information on Mandatory Comprehensive Credit Reporting Regulations, please have a read of the Exposure Draft and the Explanatory Statement as well as one of our other articles, APRA to remove investor lending benchmarks following credit reporting legislation announcement.

We can help

With the anticipation of the open banking regime, many financial institutions especially the big players are seeking talent who can assist with this transition. If you would like to discuss current opportunities within the open banking space or find your next hire, please do not hesitate to contact us on 02 9285 1000. You may also follow our LinkedIn page to keep up-to-date with industry news.

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