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Positive reporting way forward in tight market Published: 10:54AM Wednesday March 04, 2009 Source: ONE News A review of the Credit Reporting Privacy Code 2004 was recently initiated by a team led by the Office of the Privacy Commissioner. As part of the review, the team is considering what should be included in credit reports, and whether New Zealand should move from a negative to a positive reporting system. The current system has been criticised by some credit providers for not giving a full and accurate picture of an applicant's credit background, making it difficult to assess whether to issue a loan. At the moment, an applicant's credit report need only contain a history of credit applications, not whether the applications were successful, as well as payment defaults and bankruptcies. A positive reporting system, on the other hand, requires more information such as what loans have been used for, who the lender was, whether the credit limit approved, and whether the account is still active. Ronnie Tan from credit management firm CreditWorks says positive reporting is a way to evolve with the new, tighter credit market. "What we did five years ago when the market was really good, the tools that we had to assess risks or manage risks, do not apply any more today because the environment has changed," he says. CreditWorks is the only firm in New Zealand that acts as a positive reporting bureau for commercial clients. It has 200 clients who provide credit information on a daily basis, creating credit transparency. "Cashflow is king, so is information. In today's environment where the market is so tight, everybody's looking for the added advantage when they're assessing risks. Not only assessing risks but also monitoring their customers as well," he says. If positive reporting was implemented, it may make it harder for some to borrow. But as Tan points out, it will reward those with a good credit history. "What positive data does is it commoditises the credit history that they've got and ensures that with that good quality of credit history created they can actually borrow money cheaper," he says. But while Tan is in favour of a compulsory positive reporting system, he warns that it should not only include financial institutions, but others in the chain such as trade suppliers. "When you look at the market a lot of trade suppliers are currently the customers' biggest investors apart from the banks, so they provide goods and services by way of credit. In some industries, they're stretching it to 60, 90, 120 days," he says. Tan says this creates stress as suppliers are not being paid for the goods, but cannot borrow money because the market is so tight. Positive credit is widely used around the world, such as in the Asian economic powerhouse, Singapore. Australia, like New Zealand, uses negative reporting. Copyright 2009 - Television New Zealand (TV1) Original article can be viewed here |
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