Treasury should find out how well the system works in banking before moving on.
Press pause on CDR, urge accounting bodies
The three professional accountancy bodies have joined forces to recommend a pause in the expansion of the consumer data right (CDR) into non-bank lending and a thorough review of the system first.
The submission rejected a claim by Treasury that the move would give consumers “immediate visibility” of their total obligations due to implementation issues, and urged consolidation of the current regime as a priority.
“We are of the view that now is the time to consolidate the framework by incentivising consumers to engage with the current regime and drive data across existing CDR channels,” said the submission.
“This will reveal to CDR participants what works well, what needs to be adjusted, and if there are fatal flaws.
“This should be supported by a review of the innovative products developed to date.”
The submission, jointly put by CA ANZ, CPA Australia and IPA, said a study of how well the CDR regime works in banking would seek data on a number of questions, including:
- The level of consumer awareness of the current CDR regime, which takes in more than 100 bank brands. This would also aim to show how they manage “dashboards”, the reasons why they consent to disclosing data, and the most common concerns.
- The accuracy and quantity of the data going to accredited data recipients, and the cost of necessary IT upgrades
- The main barriers to entry for data holders in banking, given a recent three-month extension to non-majors to implement joint account data sharing
It also said further analysis of the non-bank lending sector is needed, with many small operations among the more than 1,000 Australian Credit Licence holders.
The cost of the IT necessary to participate in the CDR system meant few of the small operators were likely to join, the submission said.
This would reduce competition in the sector and present problems when meeting consumer data requests in which one non-bank lender was excluded.
“Accordingly, Treasury should include in its assessment the point that potential data holders in non-bank lending are likely to have lower levels of technological sophistication, data security awareness, and streamlined systems to meet complex regulatory requirements,” the submission said.
But the submission says the impact on its members is of most concern, as they are the “trusted advisers” to consumers in the CDR rules but will be left exposed by an expansion into non-bank lending.
Key concerns of CA ANZ, CPA Australia and IPA include:
- The lack of adequate infrastructure to give advisers “immediate visibility of the total obligations consumers have with other banks”.
As yet, they said, it is untested and would “require some form of aggregation tool to make total obligations visible”.
- The potential liability for “trusted advisers” when giving advice to consumers using CDR data, due to its inability to capture all possible products.
- The need to invest in sophisticated software to meet data receivers’ requirements to receive CDR data.
- The likelihood that emerging products, for example from blockchain-based decentralised finance platforms, will be excluded from the scope of data holders.
“We support, in principle, the expansion into non-bank lending, but only after a period of consolidation,” the submission said.