In an interview with Alan Jones on 2GB on 26 March 2014, Attorney General George Brandis announced that the time after which late payments could be reported to Credit Reporting Bodies under the provisions of the Credit Reporting Privacy Code (CR Code)will be extended from five days to 14 days.
The Attorney General acknowledged and thanked Alan Jones for his contribution in raising the issue. The transcript of the conversation reveals:
“Now when you raised this matter with me, the week before last Alan, the relevance of the five days was that was called the period of grace. In other words if a payment was due, let us say for arguments sake, on the 10th of April and it wasn’t paid for five days beyond that then it was treated in the credit history of having been late. Five days, for all the reasons we discussed the week before last, does seem a ludicrously short period of time to treat a late payment as being late even though technically it is. So my office has been in discussion with the industry, with the Australian Retail Credit Association, and we’re very confident that they will agree now to extend that period of grace, that is the period within which a late payment is not treated as late from five days to 14 days. Now that is in fact what at the time these rules had been developed last year the consumer association themselves asked for. So this is a win and I’m grateful to you, Alan, for drawing it to my attention and raising it because as a result of that interview we did the week before last that we’ve had this change”.
That means that clause 8.1 of the CR Code will be amended to replace five days with 14 days (see below). It is certainly true that in some circumstances a payment that is only five days late can be reported to a Credit Reporting Body. However, that is not always the case – five days is the minimum timeframe.
The reason why five days is the minimum timeframe arises because of the way the CR Code is drafted.
We have extracted clause 8.1 of the CR Code below. You will notice that a missed (late) payment can only be reported at five days overdue on the last day of the month in which the payment became due.
So, if at the end of a month a payment is only four days overdue, you cannot report that payment as “missed” at the start of the next month. You must wait until the first day of the month after that. In the example given it will be 34 days after the payment became due before the late payment can be reported to a credit reporting body.
8.1 For the purposes of this paragraph and the definition of repayment history information in Section 6V of the Privacy Act:
(a) consumer credit is overdue if, on the last day of the month to which the repayment history information relates, there was at least one overdue payment in relation to which the grace period has expired; and
(b) the grace period allowed by the CP for an overdue payment must be at least 5 days, beginning on the date that the CP’s systems first classified the payment as being in arrears. Explanatory Memorandum p.129-130
Our concern with the proposed change is that unless the CR Code is further amended, a payment can be somewhere between 14 days and 43 days late before it is reported as a “missed” payment. This is especially so given the fact that “default information” can be reported after 60 days and it is clear that a missed or late payment is not about a default situation.
This change will reduce the usefulness and effectiveness of the “positive credit reporting” data credit providers hope to input into the credit reporting system.
This problem could be solved if the CR Code was amended to allow reporting of a payment which is 14 days late and abandon the concept presently in the CR Code about payments being “overdue on the last day of a month” and the “grace period” having expired.
It will be interesting to see if the Privacy Commissioner (the OAIC) will allow the CR Code to be amended in the manner sought by the Attorney General and what if any conditions will be imposed. It is not a given that this will happen.