Processes & obligations
Information on credit reports must be correct and the law imposes strict obligations on credit providers to correct information where they become aware it is incorrect.
Where a credit provider has made a correction, they are obliged to notify credit providers and other organisations (called affected information recipients) who have accessed that information in the previous 3 months.
However, they are not obliged to notify the consumer.
For example, a credit provider may have made an error reporting repayment history information for a consumer, and they identify the error through an internal process review. That credit provider will report a correction to the credit reporting body, and the credit reporting body will work out who has accessed that information in the previous three months and notify them of the correction.
Consumers also have rights to seek a correction where they believe the information is incorrect. For a consumer the important first step is to obtain copies of their credit reports (from each of the three credit reporting bodies).
CreditSmart includes a handy checklist for what to look out for when determining if there is an error on the credit report:
Understanding the correction processes
The correction processes can seem complex but are based on some fundamental principles:
- Consumers should have the ability to seek corrections from any credit provider or credit reporting body who have reported any credit information for them, even if the credit provider or credit reporting body responding to the correction request did not report the information the consumer is seeking to have corrected
- Corrections have to be determined in a timely fashion, organisations can’t unreasonably ‘sit’ on a correction request. And when a correction is made, it should again be given effect without delay.
- Corrections need to be made wherever the information is held, and continues to be used. This means the credit provider who reported the information in the first place, but also all the credit reporting bodies who continue to hold and report that information.
- Consumers are entitled to complain to an external dispute resolution (EDR) scheme, such as the Australian Financial Complaints Authority (AFCA), if the correction processing requirements have not been met or if the consumer is not happy with the response to the correction request (for example, the credit provider says the information is correct, but the consumer maintains it is an error).
The best advice for a consumer seeking a correction request to be made as soon as possible is to make sure they provide all supporting information upfront. If the correction request is urgent because the consumer needs the information corrected so they can apply for credit, make sure you let the credit provider or credit reporting body know of the urgency.
If an error is identified – or even if a consumer is unsure whether or not information is correct – the consumer can make a correction request. Correction processes are known as ‘first responder’ processes and mean that a consumer can make a correction request of any credit provider or credit reporting body who has held credit information for the consumer. This can include, for example, a credit provider who may have rejected a consumer’s application for credit.
Once a correction request is made, that first responder organisation is required to consult with the credit provider who reported the information, to check whether or not it is correct. CreditSmart suggests the quickest and easiest way for a consumer to get a correction made may be to raise the correction request with the credit provider who first reported that information (although this may not always be possible, for example, if that credit provider is no longer operating).
A response to the correction request is required to be provided to the consumer within 30 days. 30 days is the maximum time period; credit providers and credit reporting bodies are required to process the correction request as soon as practicable.
When responding to the correction request, the response should set out if the information is correct or incorrect, and if the response is that the information is correct (i.e. there is no error), the reason why including any substantiating evidence.
However, where a decision is made that the information is incorrect (so the correction request has been successful), the credit provider or credit reporting body is required to notify the consumer within five business days of having made it.
In notifying the consumer, the credit provider or credit reporting body need to explain:
- What the information being reported for the consumer now looks like
- How the consumer can get a free credit report from each of the credit reporting bodies to check the information
- Who they are notifying of the correction (so which other organisations – such as other credit providers) what they are being told, and whether the consumer wants any additional organisations notified of the correction.
Sometimes more time than the 30 days is needed to respond to the correction request. Where that happens, the credit provider or credit reporting body is required to write to the consumer to request more time.
When making this request, the credit provider or credit reporting body must explain:
- Why the request is being made
- Exactly how much more time is required to respond
The consumer can decide whether or not to agree to the request; they are not obliged to agree. If they do not agree, the next step will be to lodge a dispute with an EDR scheme.