More information including drivers licence numbers to be used in credit reports to 'help avoid mistakes'

New Zealand's Privacy Commissioner has changed credit reporting rules, meaning more information can be included in credit reports about credit accounts such as limits and types of accounts.

Commissioner Marie Shroff said credit reporters will be able to collect and use more information about people and, for the first time, they can collect drivers licence numbers to be able to match people's credit information more accurately.

"One effect of the changes is that credit reports will show more information about current credit accounts - for example the type of account, the credit limit, and whether the account is open or closed. Until now, credit reports only contained details such as a person's failure to pay a debt and credit enquiries (when a person asked for a loan or wanted to buy something on hire purchase)," Shroff said.

"A further effect is that credit reporters will be allowed to use driver licence numbers to match credit information about individuals.

"This will help make sure that the right information is reported about the right individuals and help avoid mistakes," she said.

Credit reporting agency Dun & Bradstreet welcomed the news, saying the reforms would improve lending decisions and access to credit for both consumers and small business.

"The reforms will allow credit reports to include details on the type of credit accounts a consumer holds and the credit limit in addition to existing permissible details such as defaults, court judgments and bankruptcies. This shift to ‘comprehensive credit reporting’ is consistent with nearly all developed countries in the world and leads Australia, which is currently preparing for the release of draft legislation to introduce a similar system," D&B CEO Christine Christian said.

"The international experience from the shift to comprehensive credit reporting is that it has the capacity to both reduce default rates and improve access to credit for poorly served markets such as small businesses. The additional information allows a credit provider to make a more informed decision about the credit worthiness of an applicant thereby preventing the granting of credit to consumers who may be harmed by further credit exposure," Christian said.

"Furthermore, the reforms improve access to those consumers’ that are credit worthy but denied access because of a lack of substantiated information. Unincorporated small businesses typically fall into this latter category and have been major beneficiaries of these reforms elsewhere through increased access and reduced prices," she added.

Here is the release from the Privacy Commissioner:

Privacy Commissioner Marie Shroff announced changes to credit reporting regulation today with a new amendment to the Credit Reporting Privacy Code. Amendment No.4 is the result of a two year review of the code, and included an extensive consultation process with a reference group of consumer and industry representatives. 

Amendment No.4 brings in two key changes. Credit reporters will be able to collect and use more information about people and, for the first time, credit reporters may collect drivers licence numbers to be able to match people's credit information more accurately.

One effect of the changes is that credit reports will show more information about current credit accounts - for example the type of account, the credit limit, and whether the account is open or closed. Until now, credit reports only contained details such as a person's failure to pay a debt and credit enquiries (when a person asked for a loan or wanted to buy something on hire purchase).

A further effect is that credit reporters will be allowed to use driver licence numbers to match credit information about individuals. "This will help make sure that the right information is reported about the right individuals and help avoid mistakes," said Mrs Shroff.

"I think that the changes will bring substantial benefits to individuals in their dealings with the credit system. There should be more accuracy and completeness in the credit reporting system and this should enable better assessments of credit worthiness and more responsible lending," said Privacy Commissioner Marie Shroff.

"However, I am very aware that more comprehensive reporting also means more intrusion into people's financial lives. It involves wider sharing of private financial information," Mrs Shroff said. 

"Given the substantial increase in sensitive financial information that will become available to third parties on credit reporting databases, Amendment No.4 also has strong new controls to protect privacy. These additional controls are necessary to protect individuals and ensure that the credit reporting system is trustworthy and accountable," Mrs Shroff said. 

The new controls include limiting who can see credit account information. Prospective landlords and employers, for example, will not be able to access the new positive information. Also, credit reporters must now conduct a robust auditing process and must report to the Commissioner each year. 

To make sure that the driver licence numbers are not misused or made available to others, credit reporters will be required to convert the driver licence number into a new number and retain and use only that number. This will prevent credit reporters building up databases of driver licence numbers.

"This amendment represents a major change to the regulation of credit reporting in New Zealand," Mrs Shroff said.

"There was wide support for a number of the changes, both where they expand the credit reporting regime and where they impose further obligations on credit reporters to safeguard privacy. Of course, there were concerns with the expansion of the credit reporting regime. I carefully considered all aspects and believe that the Amendment strikes the right balance."

A copy of Amendment No.4 is available at www.privacy.org.nz/credit-reporting-privacy-code/ along with an information paper.