• 14/06/2024

Introducing CCR: Lending Behaviour

Rebecca Pike| Australian Broker| 20 August 2018


The head of a credit reporting facility has said brokers will need to be aware of lenders’ new risk appetite, including risk-based pricing, after comprehensive credit reporting (CCR) is introduced.

The way lenders report borrowers’ credit information is changing and the major banks now have until the end of September to provide at least 50% of credit information. The rest must be provided by the same time 2019.

Mike Cutter, group managing director Australia and New Zealand at Equifax, said there could be effects such as risk-based pricing and new lender appetites, which will make manoeuvring around the home loan space a complicated process.

Cutter said brokers are best placed to work out which lenders and products are right for their customers, as well as explaining exactly how the new CCR process works.

He added, “CCR is essentially a more effective decision making tool. It gives better and deeper insight into the probability of a customer repaying their debt.

“It provides greater prediction or greater insight into customers. It makes the efficiency or effectiveness of risk-based pricing better. So we do think there’ll be an increase of risk-based pricing in the marketplace.

“I think there’s the potential for it to be a positive, so customers who are very low risk are likely to enjoy better rates.

“For customers who are more marginal, the mainstream lenders or regulated lenders will now have a better insight into that customer and potentially we could see the development of more near prime products from regulated lenders or mainstream lenders and it will stop the necessity for individuals to seek lending from unregulated product providers,” he added.

Regardless of risk-based pricing, lenders will have different risk appetites or changes to credit policy, as they gain access to more information than before.

Cutter said it was important brokers get permission for an access seeker report, so they can work out ahead of time which lenders best suit their customers.

He said, “When it’s a mature market and everyone’s using CCR, which is what we think will occur, that’s the point when brokers have to understand what the credit appetite is for each of the different participants.

“The speed at which we get to that steady state will depend on how quickly all of the lenders start reporting and how well and how quickly, or how well they articulate to brokers any change they’re making to their credit risk appetite.

“We have a capability in Australia to provide an access seeker report to the broker. So the broker can look, with the permission of the individuals, at the credit report for their customer without leaving a footprint on the bureau.

“What that allows them to do is double check with the customer that they’ve identified all their obligations and all the accounts that they’ve got.

“But it also gives the brokers a better understanding of the customer and can better determine which lenders are more likely to suit the particular needs and profile of that applicant.”

Brokers will be able to go to their aggregator portals for their customer’s access seeker report, or straight to a credit reporting bureau.

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