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A Positive Start, but More Information Needed – MasterCard
ALRC Report is a Strong Step Forward
Sydney, 17 September 2007 - MasterCard welcomes the release of a Discussion Paper by the Australian Law Reform Commission (ALRC) recommending an increase to the amount of information lenders have when deciding whether to issue loans. MasterCard hopes this is the first step in a journey of change, with a number of key elements still to be raised. Currently, the Privacy Act allows credit files to include only negative information relating to a potential borrower, but the ALRC discussion paper recommends the addition of current credit accounts, when those accounts where opened and closed and current credit limits. Executive Vice President of MasterCard Australasia, Leigh Clapham, said while he welcomed the recommended changes, he believed more information was needed in order to provide lenders with greater, more detailed knowledge. "There’s no question these recommendations by the ALRC are a move in the right direction," said Clapham. "But the more comprehensive system proposed by MasterCard is really the next step. "That next step would equip lenders with even more information about applicants’ capacity to service additional loans, including vital information such as the balance of their existing loans. "Those changes would give lenders more information – information that provides greater protection for individuals from over-indebtedness and improves credit quality in Australia. "Some people have incorrectly argued that changes would make it easier for low income earners to obtain loans. "But the reality is that people on low incomes are already accessing credit – expensive credit from unscrupulous lenders. "Comprehensive credit reporting will make credit more affordable for lower socio-economic groups while at the same time protecting vulnerable consumers from over-indebtedness and exploitation by those unscrupulous lenders." Clapham believes the real-life examples speak for themselves. "When Hong Kong introduced a comprehensive system in 2003, bad debt percentages dramatically decreased within a year, with a substantial 27 per cent decrease in individual material defaults and a 64 per cent reduction in credit account write-offs," says Clapham. The ALRC’s discussion paper is the culmination of four years of work by MasterCard to help government understand the benefits to the wider economy. In 2004, MasterCard commissioned research by ACIL Tasman which showed that a move to a more comprehensive credit reporting in Australia could generate an additional $10 billion in GDP over 10 years. MasterCard further educated the credit reporting discussion by commissioning research in 2006 by the Centre for International Economics and Edgar Dunn & Company which examined the various credit reporting models around the world and assessed their strengths and weaknesses. "Comprehensive credit reporting is about improving the quality of credit in the economy, which delivers benefits to consumers and businesses alike." About MasterCard Worldwide
MasterCard Worldwide advances global commerce by providing a critical economic link among financial institutions, businesses, cardholders and merchants worldwide. As a franchisor, processor and advisor, MasterCard develops and markets payment solutions, processes over 16 billion transactions each year, and provides industry-leading analysis and consulting services to financial institution customers and merchants. Through its family of brands, including MasterCard®, Maestro® and Cirrus®, MasterCard Worldwide serves consumers and businesses in more than 210 countries and territories. For more information go to www.mastercard.com. Contacts:
Melissa Devine, 02 9818 0950, mdevine@ppr.com.au
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