The broker landscape could change as a result of new credit reporting rules, according to one broker who adapted to the same changes in New Zealand.
From 1 July banks in Australia were required to start conforming to the new comprehensive credit reporting (CCR), which will provide a greater overview of a borrower’s credit history than in the past.
Experts are warning brokers that lenders may be able to make different decisions on which customers are approved because of the new information they have.
The changes mean borrowers who previously qualified for a mainstream loan could now be declined and require alternative finance, because lenders will be able to see information such as the borrower’s undisclosed credit accounts and repayment history, stretching as far back as 24 months.
In New Zealand, the system came into place a few years ago and one broker who went through the transition said he had to upskill in non-conforming loans as he found himself having to look for alternatives in some cases.
Bruce Patten said that New Zealand has seen an increase in non-conforming loans and he encourages brokers in Australia to prepare for the change.
He said, “You’ve got two options, you can do what I used to do which is refer to someone who specialises in it, but you’re going to pass away a fair amount of income, or you can bite the bullet and upskill.
“You’ll be doing it more often which means you’ll learn about it more and you’ll find it easier. The more you do it the easier it becomes.”
Patten also warned brokers that there needs to be a lot of education with their clients over the transition period while banks hand over their credit information.
By the end of September 2018 banks must have given at least 50% of their credit data and the rest must be provided by the end of September 2019.
This means there will be 12 months where different lenders have provided different information and not all of the information will be available.
He said, “It was really about the awareness of what a lender was seeing and how that might affect their decision making. That’s what they need to be in tune with.
“The main thing is brokers need to educate their clients so they understand it. They need to be careful they’re getting 100% correct information because the bank can see a facility the bank can apply for.
“They might get a decline for nondisclosure whereas in the past they wouldn’t have had that visibility of a change in credit limit.
“If they accidentally or deliberately leave something out it puts the application at risk. Brokers should be educating the client so that they know the banks know all and see all. Don’t just take it for granted that what the client has told you is correct.”