There are many that feel the changes to credit reporting legislation that comes into effect in March 2014 will mean the end the credit repair industry.
Some credit providers seem so sure of this that they are already using this as an excuse not to cooperate with credit repair companies and in many cases are refusing to produce supporting documents such as credit contracts, demand notices and contact records etc, even when the credit repair company has the authorisation of their client to request and review these documents on their behalf.
Some credit providers are even refusing to remove negative credit listings such as defaults when it has been proven they didn’t follow the required legal process as they feel the credit repair company in question will not be around much longer.
In March 2014 there are significant changes to the credit reporting platform with the provision for positive credit reporting being one the largest alterations. Currently Australia has what is known as negative credit reporting which means that other than general information such as the persons age, address, drivers licence and past credit enquiries only negative outcomes are recorded such as payment defaults or court actions such as Writs and Judgments. This information is used to determine a person’s credit score which is what most credit providers use to determine if an applicant is credit worthy.
What this really means is a credit provider is only able to view what an applicant has done wrong in the past and is not able to consider what they may have done right such as making payments on time or retiring a loan facility on time without incident.
You could imagine that if a credit provider was reviewing an applicant’s credit file and they saw a default listing and nothing else they may quickly draw the conclusion that the applicant is a bad credit risk and therefore decline the application. On the other hand if the same credit file also contained positive credit records and demonstrated that the applicant had also held and retired other credit contracts without incident then their attitude towards the applicant may be quite different and they may elect to approve their application.
One other change to credit reporting is the provision for a credit provider to record a late payment on a credit file. This is quite different to a payment default as in order to list a default the borrower must be at least 60 days in arrears, a late payment recording can be made if an account is behind by as little as a week. Where a default listing is recorded for a five year period a late payment listing will only be recorded for two years.
When a credit provider lists a default they are bound by law to follow a very strict process prior to recording this on a credit file, it is this process that credit repair companies review and in many cases challenge in order to have a default listing removed.
Some feel that credit providers will stop listing defaults and only record late payments as they feel a credit repair company may not be able to challenge this type of listing.
Certainly it would be true that if credit providers stopped listing defaults the credit repair industry would be in jeopardy as such listings represent a significant portion of their workload.
I Feel that the reality will be quite different. Many credit providers and debt collection companies use default listings as a debt recovery tool and while some credit providers themselves may choose to steer clear of this nature of listing in the future it is more than likely external parties such as collection companies will continue to list defaults so really it may only be the nature of the listing entity that changes and not the number of default listings recorded.