Greenleaf, Graham --- "Advice on obligations of credit providers" [1994] PrivLawPRpr 148; (1994) 1(10) Privacy Law & Policy Reporter 192

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Advice on obligations of credit providers (1)

Australian Privacy Commissioner - Credit Reporting Advice Summaries, Federal Privacy Handbook, p 1243 (Release 3, March 1994) - Privacy Act 1988 (Cth) Pt IIIA

See (1994) 1 PLPR 74, (1994) 1 PLPR 94 and (1994) 1 PLPR 112 for previous parts of this review of the Commissioner's summaries of written advice given to the credit industry. References are to paragraph numbers of the Advice Summaries.

Notices and agreements

Where an individual has applied for commercial credit, the individual's written agreement must be obtained before consumer credit information can be obtained about them from either a credit reporting agency (s 18K(1)(b)) or a credit provider

(s 18N(1)(b)) [8.2]. If a commercial credit application by a company requires consent to the obtaining of consumer credit reports on the company's directors, the authorised officer of the company cannot consent on behalf of the directors. However, companies could hold a written consent from each director authorising the obtaining of such consumer credit reports in relation to the company's commercial credit applications [8.3].

Section 18E(8)(c) prohibits credit providers from disclosing personal information to a credit reporting agency unless the credit provider had informed the individual, 'at the time of, or before, acquiring the information', that it might be so disclosed. A credit provider can give one s 18E(8)(c) notice which specifies 'what types of information may be disclosed', and need not give such notices on the occasion of each disclosure (except that a notice must be given on each occasion of disclosure of an overdue payment under para 2.7 of the Code of Conduct) [8.4]. The notice requirement does not apply to information acquired before 25 February 1992 (s 18V(2)). However, it does still apply to loans prior to that date (pre-Act loans), in relation to information acquired after that date (for example, default information) [8.5]. Similarly, the obtaining of a credit report from a credit reporting agency involves a disclosure of personal information (the reason for obtaining the report), and the notice requirement therefore applies in relation to both pre-Act loans and post-Act loans [8.6]. The s 18E(8)(c) notice may be given orally (see Explanatory Notes to Code of Conduct, para 31) if the application is not yet in writing (for example, telephone applications for credit), but the obtaining of a written acknowledgment is advisable [8.10].

Where an activity requires an individual's agreement, the credit provider cannot continue the activity once the individual has revoked the agreement, and clauses attempting to make consent irrevocable would be ineffective. However, s 18E(8)(c) only requires notice to be given to an individual, and continuing disclosures after notice are lawful even if the individual requests that the disclosures cease [8.7].

An individual's agreement must be obtained before a credit provider discloses information to another credit provider

(s 18N(1)(b)), but the agreement may be oral if the credit application was oral and is not yet in writing (s 18N(1A)). Such an oral agreement would not authorise subsequent disclosures for other purposes, and written agreement should be obtained when the formal credit application is made [8.8]. Agreement to disclosure is also required for pre-Act loans [8.8]. Agreement is also required in relation to disclosure of a person's commercial credit worthiness where such information is being used in a consumer credit context [8.9].

The requirement to notify an unsuccessful credit applicant that refusal was wholly or partly on the basis of a consumer credit report (s 18M) does not apply to applications for commercial credit, but could be adopted as a desirable business practice [8.11]. It does apply to refusals to authorise credit card purchases [8.12]. It does apply where an individual has been refused credit wholly or partly because of an adverse credit report about a proposed guarantor (s 18M(3)) [8.13].

Disclosure to credit reporting agencies

Cheques: There is no provision in s 18E for the listing of overdrawn cheque accounts which do not involve the provision of credit. For dishonoured cheques, only cheques for not less than $100 which have been twice presented and twice dishonoured may be listed [9.2].

Overdue payments: It is considered that 's 18F indicates a clear intention that information about overdue payments is not considered to be permitted contents after it has been included on an individual's file for five years'. The practice of some credit providers of 're-listing' overdue payment information could therefore result in the same information being on an individual's file for more than five years, 'contrary to the policy intent of the legislation' [9.3].

A particular payment must remain overdue more than 60 days before it can be reported, but the credit provider is not required to report that the payment is no longer overdue until all arrears have been brought up to date [9.7]. There is no deadline for reporting that payments are no longer overdue, but 'it is expected that credit providers take reasonable steps to update records so that [a credit information file] is accurate and not misleading' [9.10]. The requirement to report repayments of reported overdue payments applies to pre-Act loans [9.10].

Amount of credit: The amount of credit applied for must normally be reported, but if it is unspecified (for example, an overdraft, line of credit or credit card), this may be reported [9.6].

Payment arrangements: A credit provider may report that a debtor previously listed in default has entered a scheme of arrangement and both listings remain on the file [9.8]. Other arrangements for repayment may be reported and noted on the file if they constitute a formal agreement to vary the loan agreement, but not if merely 'a one off payment ... to cover extenuating circumstances' [9.9].

Current credit providers: The obligation of a credit provider to report that it is no longer a 'current credit provider' (s 18F) only apply if the credit provider has reported that it was a current credit provider in the first place [9.11]. If a credit provider assigns a debt (as distinct from merely referring it to a collection agency) then it must report that it is no longer a current credit provider [9.12].

Serious credit infringements: 'Actions which are not related to the provision of credit as defined in s 6 ... could not be considered to constitute a serious credit infringement'. 'The Act clearly places the onus on the credit provider to form a considered opinion in each case ... [and] it is generally suggested that credit providers take a conservative approach' [9.14].

The final part of this review, concerning disclosure and use of credit information by credit providers, will appear in a later issue.

Graham Greenleaf