Lenders are potentially damned if they do and damned if they don’t

Lenders will be bound by the new Australian Privacy Principles in the Privacy Act 1988 (Cth) (“Privacy Act”) from March 2014. Lenders collect and hold a range of personal information from and about their loan applicants and proposed security providers. This information is typically collected from a third party such as mortgage brokers or credit agencies. If someone believes that the personal information held by the lender or credit agency is not accurate, complete or up to date, they have the right to request that it be changed.

A lender is obliged to respond to a request to correct personal information held about an individual, even though that information was obtained from a third party provider. Before, the person making the request would need to provide some kind of proof that an item on their record was wrong. Now, the lender or credit agency has to prove that it’s correct. If the lender simply refuses to correct the information, it must give the individual a written notice as to why it is refusing to do so. This is difficult for a lender who may have no knowledge as to whether or not the adverse credit report is accurate or not.

Furthermore, if a complaint isn’t resolved to the satisfaction of the person making the request, they can engage one of the “external dispute resolution” processes, such as COSL or FOSL. It may simply force lenders to change the information to avoid opening itself up to a complaints process. A lender could however still decide not to make a loan regardless of the correction request without having to disclose its own credit assessment. However, if an intermediary such as a broker recommends a loan be made on the basis that any negative payment history is corrected, and the lender refuses to do so, the lender could be at risk of a complaint. Lenders are damned if they do correct but nevertheless decline a loan and damned if they don’t correct.

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