20 May 2005
Shifting to a Fair Positive System
"D&B believes strongly that a parliamentary inquiry provides the best forum for open and transparent debate on the issue of Australia's consumer credit reporting system."
Consumer credit reporting has become a hot issue in recent times. Increased public and media awareness of this issue is a result of the many different stakeholder views and D&B's recent work in arguing for a parliamentary inquiry into Australia's consumer credit reporting system.
D&B believes that reform of the existing 'negative credit reporting' system is important for both consumers and the broader Australian economy. However we recognise that not all stakeholders share our view. It is so these divergent views can be heard and tested that D&B has pushed for a parliamentary inquiry.
D&B believes strongly that a parliamentary inquiry provides the best forum for open and transparent debate on the issue of Australia's consumer credit reporting system.
Consumer debt continues to grow in Australia and raise alarm bells across the community. Unaffordable and unsustainable credit growth is a matter of real concern. All too often credit providers are providing credit to consumers who are already swamped by debt. Yet the lenders may be unaware of this because of the lack of quality information available on consumer credit reports.
The need for lenders to have better information to arrive at informed lending decisions is central to D&B's argument for reform of the existing credit reporting system. D&B also believes that with better information, comes greater responsibility for lenders.
There are a number of concerns with providing lenders greater information. D&B acknowledges these concerns. The need to ensure these views are heard and tested has been an important factor in our push for a parliamentary inquiry.
D&B also believes that meeting with all stakeholders so that concerns can be raised and addressed is critical to an informed debate. Already I have met with a broad range of stakeholders including industry groups, consumer advocates and financial counseling representatives. I am committed to ongoing discussion in this way.
I believe this issue will gather momentum over coming months and will require all stakeholders to examine the issue and benefits of reform closely. D&B will continue our push for that process to be open, transparent and based on fact.
Australia's 2004 debt
Australian consumers are spending more than they can manage during the holidays, women are better payers than men, and consumers from regional areas are better payers than those from urban areas.
These are just some of the 2004 consumer credit debt default trends released by Dun & Bradstreet, a leading provider of receivables management and consumer credit reporting services.
"With over 160 years experience in collecting overdue accounts in Australia, we have seen evolving trends that reflect consumer spending habits and highlight the need for consumers to take better control of their credit," said Christine Christian, CEO of Dun & Bradstreet Australasia.
"Payment defaults are expensive and inconvenient for consumers and lenders alike," added Ms Christian. "So, when outstanding accounts are referred to us, we try to provide the best possible outcomes for customers and consumers."
"However, consumers need to better understand the value of a good credit history and the terms and conditions of the credit they apply for."
The amounts getting people into trouble
Surprisingly, D&B's figures for 2004 show that about half of the consumers who fell into the default trap (49.87%) were avoiding debts of less than $ 1,000.
Men versus women
In general, 2004 D&B's figures suggested that men were more likely to default on payments than women.
Men were almost twice as likely to default on telecommunications debt as women (57% versus 30%).
Men were more likely to default on their cable / satellite TV debt as women (57% versus 42%).
City versus country
In addition, the figures showed that people from urban areas were:
- More than twice as likely to default on their telecommunications debt as people from rural areas (68% versus 32%);
- Nearly seven times as likely to default on their utilities debt as people from rural areas (87% versus 13%);
- More than twice as likely to default on their credit card debt as people from rural areas (68% versus 32%);
- More than twice as likely to default on cable / satellite TV debt as people from rural areas (68% versus 32%).
The yearly debt cycle
The placement of outstanding consumer debt with D&B was generally cyclical in 2004, with highs in January-February, May-June and September-October. This suggests that consumers are spending more than they can handle during the major holiday periods.
According to Christine Christian, the increased use of telecommunications and credit cards is presenting significant problems for many consumers.
"It's easy for people to lose track of what they are charging to their credit cards and of how many calls they are making on their mobiles," she said.
"All too often, people have no idea how much they have charged, how many calls they have made or how many text messages they have sent until they get their bill. And that's when they realize they have a problem," she added. "This is very different to utilities, for example, where consumers use only what they need and can more easily manage usage rates."
"Overall, our figures show that consumers need to be much more careful about managing their credit levels and monitoring their spending habits - especially during the holidays, when temptations are high."
Credit reporting - International events
Beijing was the host city for two international credit reporting conference late last year - the "Fourth Consumer Credit Reporting World Conference" and a World Bank conference on "Public Policy for Credit Reporting Systems".
China is one of the biggest and fastest-growing consumer credit markets in the world. Therefore development of an efficient and effective credit information system to support the expanding retail credit market is a top policy objective for the Government.
The events brought together public and private sector experts and commentators from around the world. Conference delegates represented consumer and commercial credit reporting firms, banks and other lenders, economists, central banks, finance ministries and regulatory bodies.
The "Fourth Consumer Credit Reporting World Conference" was an opportunity for credit bureau executives to share best practice and industry innovations, to learn about credit reporting in specific countries and regions, to discuss the role of credit bureaus around the globe, and to debate important issues such as legislation and privacy.
The World Bank conference focused on the role of public policy in establishing and strengthening credit reporting systems. Topics included:
International "best practice" for developing a legal framework for credit reporting
The use of credit data to expand credit access to marginal borrowers, such as small enterprises and low-income consumers
Strategies for public education and outreach, so that borrowers and lenders are willing and active participants in the credit reporting system.
Among the speakers at the conference was Michael Turner, President of the Information Policy Institute, who presented new findings about the social and economic benefits of positive consumer credit reporting. Dun & Bradstreet has recently commissioned Mr Turner to conduct research into credit reporting and the consumer credit market in Australasia.
For more information:
Danielle Woods
D&B PR Manager Australia & New Zealand
(02) 8270 2926
About D&B
D&B is the world's leading provider of business-to-business credit, marketing and purchasing information and receivables management services. D&B manages the world's most valuable commercial database with information on more than 130 million companies.
Information is gathered in 193 countries, in 95 languages or dialects, covering 186 monetary currencies. The database is refreshed more than one million times daily as part of D&B's commitment to provide accurate, comprehensive information for its more than 150,000 customers.
The Australasian operations were bought out by the senior management group in August 2001. It was the first MBO of a wholly owned subsidiary in D&B's history worldwide.
Today Lazard Carnegie Wylie owns an approximate 90% stake in DBA and the local management team a 10% stake.
Strategies for future growth include developing DBA's commercial and consumer credit referencing business; expanding its receivables management outsourcing business; maintaining its lead in the development of unique credit and risk scoring products; and developing new products specifically tailored to the Australasian market. DBA currently employs over 500 people in Australia and New Zealand.
