Assessing credit for a service
Complaints we receive about assessing credit for a service include claims that a provider:
- approved an application for a service without undertaking a sufficient credit assessment
- approved an application for a service when the results of its credit assessment indicated the consumer was not in a financial position to be able to pay for the service
- did not place appropriate financial limits on or restrict the supply of a service in line with the results of a credit assessment
- refused an application for a service without giving reasons why.
In this position statement, when we use the term credit assessment we are referring to an assessment undertaken by a provider to determine the level of credit it will provide to a consumer for a telecommunications service.
Laws and codes of practice
The following laws and codes of practice are relevant to assessing credit for a service:
- Privacy Act 1988 Part IIIA – Credit reporting, and Schedule 1 Australian Privacy Principles (APPs)
- Telecommunications (Consumer Protection and Service Standards) Act 1999
- Telecommunications Universal Service Obligation (Standard Telephone Service— Requirements and Circumstances) Determination (No. 1) 2011
- Privacy (Credit Reporting) Code 2014 (Version 1.2)
- Telecommunications Consumer Protections (TCP) Code 2015
When we deal with complaints about assessing credit for a service we consider the law, good industry practice, and fairness in all the circumstances.
Before a provider collects personal information that it may give to a credit reporting body it must give certain information to the individual applying for the credit, including that it may consult a credit reporting body to assess the individual’s eligibility for credit, and the name and contact details of the credit reporting body.
If a provider refuses an individual’s application for credit based wholly or partly on information received from a credit reporting body, the provider must give the individual a written notice within 10 business days of the decision. Along with other information, the notice must include:
- that the refusal is based wholly or partly on credit information provided by a credit reporting body, or information the provider derived from that credit information
- the name and contact details of the relevant credit reporting body
- the individual’s right to access their credit reporting information without charge for up to 90 days following the date of the notice
- how to ask the credit reporting body to provide access to that information
- information about factors that are often taken into account when refusing credit.
A consumer can also ask the provider for access to personal, credit eligibility, credit worthiness, or credit reporting information that the provider holds.
See our position statements Credit information and credit reporting post 12 March 2014 and Personal information (Australian Privacy Principles) for more provider obligations relating to consumer information.
Rules for USO services
The Telecommunications (Consumer Protection and Service Standards) Act sets out a universal service regime to ensure that all people in Australia, wherever they reside or carry on business, have reasonable access to a standard telephone service (or an equivalent service if the person has a disability). This service is called a USO service. This will be a landline, or an equivalent if a consumer has a disability and requires additional equipment specific to their needs. A provider that supplies USO services is known as the universal service provider. Telstra is the current universal service provider.
The Telecommunications Universal Service Obligation (Standard Telephone Service—Requirements and Circumstances) Determination (No. 1) includes the following rules:
If the universal service provider refuses an application for a USO service, including for credit reasons, it must give the consumer a written statement within 10 working days of its refusal, including:
- the reason why the universal service provider refused the application and its grounds to support this reason
- that the consumer has the right to dispute the decision by asking the universal service provider to reconsider, and by complaining to the TIO if they are not satisfied with the provider’s reconsideration.
Good industry practice
Rules in the Telecommunications Consumer Protections Code include:
A provider must undertake a credit assessment of a consumer before providing them with a post-paid service, and explain to the consumer the financial implications of being provided with a post-paid service.
If a provider restricts a service at the time of application the provider must give the consumer the following information:
- the general nature of the reasons for the restriction
- which service will be restricted
- if applicable, how the restriction can be removed and who can remove the restriction.
If this information is given verbally the provider must check that the consumer understands it.
If a provider requires a security deposit before supplying a post-paid service, the provider must give the consumer information about the terms of that security deposit. This includes informing the consumer how the deposit may accrue interest, be used to pay for the service, or be repaid.
A consumer should give accurate information in response to a request from the provider for the purposes of a credit assessment.
It is in the interests of both the consumer and the provider that the provider considers the consumer’s ability to pay for the service when undertaking a credit assessment. This will minimise situations that involve a consumer contracting for a service they cannot afford.
A provider should not supply a service if:
- it has not undertaken a credit assessment when it would be reasonable to do so, or
- it knows (or ought to reasonably know) based on the results of a credit assessment or other information it holds, that a consumer may not have the ability to pay for the service.
Dealing with a dispute
When dealing with a complaint about assessing credit for a service we may ask for information or documents from the consumer and provider. This may include:
- information provided by the consumer when they applied for the service
- the provider’s credit assessment, and if none was undertaken, the reasons for this
- information about the consumer’s financial position that was obtained by the provider at the time of the application
- information about the service provided to the consumer, including its cost
- information about any restrictions or conditions placed on the supply of the service
- information about what steps the provider took to manage any risk of over-commitment.
When, in our view, a provider has not met the requirements of the law and industry codes about why it refused an application for a service, we expect the provider to comply with these requirements. This may include giving the consumer, on request, access to the consumer’s personal information and credit information held by the provider.
When, in our view, a provider:
- did not undertake any credit assessment when it would have been reasonable to do so, or
- supplied a service when it ought to have been aware that the consumer may not have been able to pay for the service based on the results of a credit assessment or other information it held
we may decide the provider should accept some or all responsibility for the cost of the service. We may also decide the provider should consider appropriate financial hardship measures, including offering the consumer an appropriate service they can reasonably afford.
Effective date: 11 March 2016
This position statement provides broad guidance on the law, good industry practice, and what the TIO may consider to be fair and reasonable in general circumstances. It is not a full statement of the law or good industry practice. The TIO considers each matter brought to it on its own particular merits.