Debt-laden go on borrowing: study

Outdated credit laws are allowing debt-laden consumers to keep borrowing, a credit data collection group says.

And one in 10 Australians who owe money to lenders intend to borrow more to survive tough economic conditions, the Veda Advantage study found.

Of those that say they will borrow more, 15 per cent of this group owe more than they did a year ago. They also said they were likely to apply for more credit in the next 12 months.

The federal Government announced an overhaul of consumer credit laws this week to license mortgage brokers and introduce tougher penalties for irresponsible lending.

The Government says the legislation, to be introduced in Parliament in June, will give greater protection to the more than 5.7 million Australian households that hold debt.

However, Veda Advantage spokesman Chris Gration says the draft legislation does not go far enough. Mr Gration said 95 per cent of bankrupts applied for credit after the point they knew they were insolvent.

"The best protection for borrowers and lenders is having access to the right information about an applicant's credit activity and exposure," he said.

"The Government needs to fast-track changes to Australia's credit-reporting laws [and commit] to introduce the new comprehensive reporting legislation."

Under existing privacy laws, a potential lender can only see if an applicant has lodged any other credit requests and whether they've been delinquent on payments in the past five to seven years. They can't tell if someone has existing debt.

The privacy laws, introduced in 1990, allow people with heavy debts to get more credit as long as they haven't missed a payment in the past.

However, Melbourne-based Consumer Action Law Centre spokeswoman

Nicole Rich said more information on borrower debt could be used by lenders to encourage dodgy lending.

"When you put more information on credit reports you get more lending," she said.

"There's a really large risk that it could lead to irresponsible lending."

Ms Rich says credit providers want the privacy laws changed so they can 'launder' marketing lists out of credit reports. "You essentially weed out people you don't want to send offers to.

The survey of 1056 Australians found that almost half had reduced personal debt when compared to 12 months ago, but 80 per cent were worried about paying future bills.

- AAP