The government is proposing a change to the privacy laws to enable an applicants credit history to become available to those considering a loan application.
This is a much needed improvement to an antiquated secrecy concept that was pushing up the rate of interest charged and allowing delinquent borrowers to rort the system, to the detriment of the responsible majority.
Anybody charged with approving a loan needs to know what loans are already in the client's name, how much money is owed - and very importantly - what is that person's repayment history - and if there have been past defaults.
That is the basic criteria necessary to make an informed decision.
There have been objections, and it is claimed that if someone returns from holidays to find they are a day late paying a bill - this will result in a permanent blemish, refusal of credit or the imposition of a much higher interest rate.
What a load of rubbish !
Removal of secrecy will allow the person's entire credit history to be viewed, and a minor discretion will be judged in contrast to an otherwise good record.
We complain about the high interest rate the banks and other lending institutions charge on credit cards and loans, but much of this is caused by delinquent borrowers who slip through the net because of the privacy laws.
It is not good business to loan money to people who are bad debtors. Defaults simply mean the lender jacks up interest rates to the whole borrowing community to cover those losses.
These changes will make it harder for desperate people in financial trouble to keep adding to their debt and reaching inevitable bankruptcy - and at the same time saddling the rest of the community with higher interest rates.
It's a big win for the majority of sensible and prudent borrowers !
No comments:
Post a Comment