CEO of SocietyOne on the marketplace lender’s experience with data sharing and CCR’s huge potential
At SocietyOne, we were delighted with the Federal Government’s plans to extend the existing legislation on comprehensive credit reporting (CCR) last year, and strongly support moves to introduce a mandatory comprehensive credit reporting regime by mid-2018.
The benefits for consumers are huge as this will transform the opportunities for them to get a better deal when applying for loans and enable them to shop around for a better interest rate. Better credit information will enable lenders to tailor products for consumers with, for example, lower interest rates or better loan terms.
The big four banks will need to have 50%of their credit data ready for reporting by 1 July 2018, increasing to 100% a year later. Of the big four, National Australia Bank began providing comprehensive credit data in February, while Commonwealth Bank has said it will do the same for its home loan customers before the end of the year. Both Westpac and ANZ intend to join the regime this year but have not announced any specifics.
Reporting comprehensive credit information, and making it available to other credit providers on a secure and confidential basis, allows lenders to consider the positive attributes of a consumer’s credit history when assessing an application for credit, not just negative information such as payment defaults, court judgements and the number of credit enquiries.
By sharing comprehensive credit data, the industry is ensuring that contributing lenders have a thorough and holistic view of a consumer’s financial situation and is better placed to understand their financial needs and therefore meet all of its requirements under the rules of responsible lending.
As a pioneer and Australia’s biggest marketplace lender, SocietyOne began sharing comprehensive credit data in November 2017, and currently, we are just one of a handful of consumer credit providers in Australia to now make positive credit data available.
"Those who are just starting to build their credit histories, such as younger Australians or migrants, will be able to build it more quickly by incorporating comprehensive data"
Since SocietyOne launched five years ago, we have used a customer’s credit score to tailor an interest rate on a personal loan to their own particular financial circumstances. We want to reward responsible behaviour rather than adopt the one-size-fits-all approach of traditional banks.
In SocietyOne’s experience, offering personalised interest rates ensures it is in a better position to assess a customer’s needs and meet all requirements under the rules of responsible lending. In September 2016, SocietyOne announced it had reached a $150 million lending milestone and by the end of 2017, we announced that lending had more than doubled to $400 million, indicating that personalised products are becoming increasingly prevalent on the consumer radar.
We also know that a large number of our customers back these changes. We carried out a customer survey in May last year and the results were overwhelmingly in support of the Government’s measures, with 88% backing the plan to give consumers more control of their data and 72% saying that banks - who currently control it - should share that information with other financial providers such as SocietyOne.
CCR also means that those who are just starting to build their credit history, such as younger Australians or migrants, will be able to build it more quickly by incorporating comprehensive data. That means that when they need a new home loan or other personal finance, they’ll be in a better position to negotiate.
While there are understandably some consumer advocate groups concerned with what this means for those with less desirable credit histories, CCR also gives consumers the ability to repair their negative credit history faster and highlight their positive behaviour on a monthly basis.
CCR has been available in the US and UK for almost two decades so it is a system that has been tried and tested. Consumers in these countries can use their credit history to seek out the best deal possible.
At SocietyOne, we will continue to strive for changes that give us the ability to better service our customers and offer them the best products for their needs, and urge the banks and other lenders to follow suit to give Australians a fair go.
Jason Yetton is the CEO and managing director of SocietyOne, a pioneer of marketplace lending in Australia. He previously worked for Westpac as group executive of retail and business banking and has also held roles at BT Financial.