overview

This profile considers the consumer credit reporting industry, in particular issues and legislation regarding privacy, the ownership of information and electronic commerce in a networked global economy. It also looks at tenancy reporting services.

It covers -

• an introduction to the industry
• a discussion of how the industry has evolved, its practice, key issues and legislative responses
• information about overseas credit reporting regimes, including profiles of major credit reporting enterprises and public registries
• a discussion of the Australian and New Zealand regimes
• pointers to Australian and overseas regulators, industry representatives and consumer advocacy bodies

The profile supplements discussion in the separate guides on Privacy & Data Protection, the Digital Economy and Online Consumers.

     introduction

Credit reporting information - personal financial history data - is a glue that binds together different parts of contemporary advanced economies and has become a focus of concerns about electronic privacy.

Practice across the globe varies but typically information about consumer credit performance - slow payment or non-payment of loans from financial institutions, court judgments relating to debts and bankruptcies - is added to a small number of data repositories that are operated on a commercial basis. That information is provided and accessed by a wide range of organisations, which include banks, retailers, health service providers, telecommunication operators, government agencies, debt collection services and recruitment agencies.

There is a similar variation in regulation of how data is collected, stored, disseminated and corrected.

Growth of major national and transnational credit reference services has reflected the ease with which financial history data can be gathered in an electronic environment and the advantages of economies of scale. As the following pages suggest, the services have attracted increasing attention from government regulators concerned with privacy, trade practices and financial supervision. Large-scale tenancy reporting services - databases about the rental of residential accommodation - were slower to emerge and have attracted less attention, arguably because the data often relates to poorer members of society.

     how much data

Estimates of the extent, composition, accuracy and use of credit data vary significantly.

It has been suggested that there are two credit reporting files for every Australian and over three for every US citizen. The US Consumer Data Industry Association (CDIA) claims that the three largest credit reference bureaus maintain around 190 million credit files, used by credit reporting agencies across the nation. Over two billion items of data are supposedly added to US credit records each month, with an estimated one billion consumer credit reports being issued annually.

The extent of inaccuracy is uncertain, typically identified when consumers are denied credit, are victims of identity theft or respond to offers to purchase access to their credit records. Comprehensive figures aren't available: industry studies have claimed that error rates are under 1%, consumer groups have identified inaccuracies of over 10% (although from what appear to be different samples).

Estimates of the size of tenancy databases varies, with suggestions that there may be over 1 million files in Australia.

     studies

We have pointed to studies of individual credit rating organisations later in this profile.

There has been no major study of the Australian and New Zealand credit reporting industry. An introduction to the US industry is provided by Mark Furletti's 2002 An Overview and History of Credit Reporting (PDF), Robert Hunt's 2003 The development and regulation of consumer credit reporting in America (PDF) and the 2003 An Overview of Consumer Data and Credit Reporting (PDF) by Robert Avery, Paul Calem & Glenn Canner.

Background to the industry's early development is provided by Lendol Calder's elegant Financing the American Dream: A Cutural History of Consumer Credit (Princeton: Princeton Uni Press 1991) and James Grant's Money of the Mind: Borrowing & Lending in America from the Civil War to Michael Milken (New York: Farrar Straus Giroux 1992).

Financial Privacy, Consumer Prosperity, and the Public Good (Washington: Brookings Institution 2003) by Fred Cate, Robert Litan, Michael Staten & Peter Wallison might usefully be read in conjunction with Reputation: Studies in the Voluntary Solicitation of Good Conduct (Ann Arbor: Uni of Michigan Press 1997) edited by Daniel Klein. Klein's Credit Information Reporting: Why Free Speech is Vital to Social Accountability and Consumer Opportunity paper is one of the more cogent arguments for increased transparency in reporting consumer financial histories.

Transborder issues are explored in papers in Credit Reporting Systems & the International Economy (Cambridge: MIT Press 2003) edited by Margaret Miller.

For Australian tenancy reporting services the salient documents are the Australian Housing & Urban Research Institute's 2003 Tenancy databases in the context of tenure management: risk minimisation and tenant outcomes in the private rental sector (PDF), 2001 Queensland Residential Tenancies Authority study (PDF) and the Commonwealth/State Ministerial Council on Consumer Affairs 2003 discussion paper.





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