Last Saturday morning tens of thousands of Australians should have woken up to a clean credit file thanks to recent changes to the law, but Credit Reporting Bodies (CRB’s) are flouting the law and refusing to remove civil court actions from people’s credit files according to leading Australian consumer and financial law firm MyCRA Lawyers.
From the 14 of February, civil court filings should no longer appear on people’s credit files and it should have been retrospective (by removing any that were already there) meaning those called before the court in the past 5 years should have been given a credit score boost unless there was court judgment, and it was specifically credit-related.
But according to MyCRA Lawyers CEO Graham Doessel, Australia’s three CRB’s are making up their own rules.
“They can’t even be consistent, one CRB is happy to clear people’s personal credit files of these civil court actions but not their business files, another CRB is only going to stop ‘adding’ to credit reports moving forward (but keeping the existing old information).
“It means anyone served up until the 13 of February will have to suffer from ruined credit for the next 5 years but anyone served from Feb 14 should be fine.
The problem is if it’s different for each CRB, it means nothing’s really changed, Mr Doessel said.- Can this be rephrased?
One area of contention is council rates.
Traditionally people who didn’t pay their rates were sued by their council and it was marked on their credit file. As of Friday, February 14, these court actions should have come off a person’s credit file, according to MyCRA Lawyers.
We say Council rates are not “credit” because, for one thing, you don’t enter into a contract with the Council to pay them, you just have to pay them.
“Equifax agrees and has removed these, but CRB Illion has taken a cynical view of the law changes and is arguing councils are credit providers because normally people pay their rates 6 weeks into the rated billing period which Illion claims means councils across the country fall under the definition of a credit provider,” Mr Doessel said.
We think this a brave interpretation and have raised this with Illion, but they say they will follow that line.
“Based on a technicality, Illion is being cute and taking a “so sue me” approach to the law changes.
“Our fear is that in no time other CRB’s may take a similar view as Illion because the more information on a credit file the more valuable it is.”
“We are now calling on the Privacy Commissioner to get involved and clarify exactly what this legislation was meant to do, because as it stands, changing the law has done virtually nothing,” Mr Doessel said.
“The change in legislation should have allowed people to get credit where previously they were rejected, or negotiate lower interest rates,” he said.
We know Brokers have been frustrated for years as clients had their bank funding cut off or rejected because of trivial and vexatious civil court actions that judged them guilty till proven innocent when it came to credit worthiness regardless of the type matter before the court. Limiting reporting to only credit-related judgments should have cleared up a lot of problems in one go.
“We started campaigning to the Privacy Commissioner in 2017 to have this detrimental and harmful misreading of rules changed,” MyCRA Lawyers CEO Graham Doessel said.
“Our interpretation is, now only judgements can be recorded on someone’s credit file and those judgements must relate to “credit” to impact someone’s credit rating,” he said.
“I recommend everyone check their credit file at https://www.freecreditrating.
It should have spelt the end of weaponized civil court actions.
“Tens of thousands of Australians have had their credit rating destroyed, businesses and financial security put in jeopardy, and all because civil court actions treated defendants as guilty till proven innocent when it came to their credit rating as ex-business partners, disgruntled employees and jilted lovers used civil courts as a weapon to cripple someone’s credit,” Mr Doessel said.
“We’ve had a client with a business employing 120 staff almost sent to the wall because of a trivial dispute with their pool repairman over $3000 that never even went to court.”
“Other common weaponized civil disputes are ex-business partners suing you simply to dry up your funding, or even spurned partners who are out to get their ex-lover’s business,” Mr Doessel said.
“We made a submission to Price Waterhouse Coopers’ three-year review of the credit reporting code on this issue 2 years ago. The 32-page submission detailed how civil court claims were being used to impact people’s credit files even when the court case had no chance of ever making it to court.
Those submissions led to the new law. It was a victory for common sense,” Mr Doessel said.
Credit reporters look for loopholes
“Credit reporting bodies have read this legislation as narrowly as possible.
In our discussions with one CRB they’re already interpreting the changes differently to us and believe this change only applies to personal credit files, not commercial credit files, which means those with the most to lose, namely small business proprietors, are potentially still in the same predicament,” Mr Doessel said.
“Anything on someone’s commercial credit file will show up on their individual file and while it is illegal to judge a consumer’s credit worthiness based on their commercial credit information, it happens every day!
We have a room full of client files that have been impacted by this very issue,” Mr Doessel said.
“For other people, they will actually have to wait till Valentines Day 2025 before their credit file is clean again, and we believe the narrow interpretation of the new laws by these CRB’s is cynical and wrong.
“The whole point or the spirit of this legislative change was meant to remove the “Guilty Till Proven Innocent” branding when it came to your credit worthiness, but if CRB’s only apply this selectively, then what’s the point,” Mr Doessel said.
“We believe the law changes need to apply to both consumer and commercial credit files and apply to all judgments and writs already on credit reports, not just new ones going forward”
“Even then the credit reporting system still isn’t perfect, with people able to besmirch someone’s credit file simply by making credit inquiries in that person’s name via the internet with a just few personal details, but we’re now headed in the right direction, Mr Doessel said.
“The logic applies to both consumer and commercial credit reports, simply commencing proceedings against someone proves nothing, and this legal change needs to apply across all credit files,” Mr Doessel said.
Patrick Earl is the Principal solicitor of ADS Law and he says “The new law says that you can’t publish ‘any judgment or proceedings that is otherwise unrelated to credit; because this information does not relate to the individual’s creditworthiness.’
“There is no obvious reason why this should only apply to consumers and not all credit reports more generally,” Mr Earl said
The new requirements came into effect on Valentine’s Day and should apply to all court proceedings and judgments so people with a civil court action (see default) on their file that isn’t the result of a credit related judgement will have legal grounds to have them removed.
Anybody who has these defaults still on their file is encouraged to contact MyCRA Lawyers for a free initial consultation.
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