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24 May 2021

Dispute Resolution Special Counsel, Blair Campbell explains how incorrect information on a credit report may be hurting your business, and what you can do about it.

CREDIT REPORTS – CREDIBLE, OR INCREDIBLE?

  • Have you applied for credit and been refused, but not understood why?
  • Have you applied for credit and been told that credit will only be provided on limited or onerous terms?
  • Have you ever wondered why financiers have issues with your application?

The answer may be that your credit report may present a negative, and possibly inaccurate, view of your financial position.

There are three major consumer credit reporting bureaux in Australia:

  1. Experian,
  2. Equifax, and
  3. Illion.

In addition many entities will use Creditor Watch – a division of Infotrack – for company credit reports.

When you apply for credit your financier will obtain a credit report from one of these entities. That credit report will normally include such information as:

  1. Information from the Australian Business Register – including such things as main name, trading name, ABN, status, registration for GST, and location.
  2. Information from ASIC – including such things as ACN, registration date, and locality.
  3. Risk Data – which includes number of Court Actions, payment defaults, and Credit Score.
  4. Credit Report – which lists Court Actions, Payment Defaults, ASIC Notices, and Mercantile Enquiries (collection agency activity).
  5. Credit Score – this is a snapshot of credit worthiness and shows a number score, and a category grade. It also states ‘chance of failure within the next 12 months’, and shows a graph with historical credit score.
  6. Other Details – including registered address, officeholders, share capital, documents lodged with ASIC, and the like.

The problem is that it is easy for a creditor to lodge a default against a company’s credit report – but those defaults are not always removed when the debt is settled (or if it is later determined the debt was not owing in the first place). If the creditor registers a default but fails to remove it, the default will sit on your report until either it is removed, or for five years.

In addition, Credit Reporting agencies are very quick to list Court Actions against entities – but very slow in removing those same Court Actions once they have been settled (if they are removed at all).

The manner in which a Court Action is resolved may also impact a company’s credit report. If a Court Action against a company is discontinued by a claimant, rather than dismissed by the Court, the Court Action will remain on the relevant company’s credit report. This is an important point to consider when settling any Court Action.

HHG Legal Group has just assisted a client with remediation of its corporate credit report. Our client had applied for finance from a leading bank, only to be rejected. As a result, they had little option but to go to a second-tier lender on worse terms. They subsequently learned the rejection was because of their credit report.

HHG Legal Group was engaged to investigate and resolve the issue.

We discovered that problems existed on both the Equifax report, and the Credit Watch report. Each of these reports showed Court Actions which had been settled several years earlier as still outstanding (strangely the Actions listed on the two reports were not the same). Some of those actions had been dismissed with the consent of the parties many years ago.

In order to clear those entries, we had to obtain copies of the Court Orders dismissing the claims and provide them to the Credit Agencies.

We also discovered a Credit Default on one report. We contacted the reporting creditor, only to learn that the debt had been paid four years ago – but they had neglected to remove their default listing. They agreed to immediately remove the default. If only they had been so prompt when the debt had been paid.

The above case is just one example of the times HHG Legal Group has assisted a client to remediate a corporate credit report.

Australia has statutory protection of private information, and the Australian Privacy Principles (APP) exist under that legislation. Relevantly APP10 addresses the quality of personal information and requires that information held is accurate, up-to-date, and complete. In addition APP13 deals with correction of personal information and requires that reasonable steps be taken to correct information which is not accurate, complete or up-to-date upon notice being given.

In addition, Credit Reporting Agencies are obliged to comply with the Privacy (Credit Reporting) Code. The Code specifically requires Agencies to ‘undertake regular testing of the credit information they use to ensure it is accurate, up-to-date, complete and relevant, having regard to the purpose for which it is used or disclosed’ (s. 5.4(d)).

In addition, Credit Reporting Agencies provide credit reports as part of a commercial service. As a result, (as they are not a financial service in themselves) they are likely to fall under the requirements of the Australian Consumer Law (ACL). In our view the provision of significantly inaccurate and out-of-date information is likely misleading or deceptive conduct and therefore actionable under the ACL.

Credit Reporting Agencies are obliged to permit you to inspect your report, to address your complaints, and to correct their records if they are inaccurate. Each have a mechanism for dealing with these corrections. Or, if you need assistance, please contact us. We would be happy to help fix your report.

*This is general information only, and does not constitute specific legal advice. Please consult one of our experienced Legal Team for specific advice relevant to your situation.

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