Guest column by Jon Duffy
Jon Duffy is the Assistant Privacy Commissioner (Policy and Operations) at the Office of the Privacy Commissioner. He is also a Consumer NZ Board Member. He checks his credit record regularly.
It’s a tight rental market. In some parts of the country prospective tenants are shuffled through rental property views in shifts due to high demand. In addition to paying higher rents, consumers are competing for fewer properties. This makes them vulnerable to requests for personal information that go beyond what’s necessary for assessing their suitability as a tenant.
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That said, landlords have a legitimate interest in assessing whether a prospective tenant is able to meet their responsibilities. That includes whether that tenant can regularly pay their rent.
Recent media reports suggest landlords are demanding copies of bank statements from prospective tenants. We assume this is to assess a prospective tenant’s creditworthiness. This practice raises several concerns.
Bank statements are a crude and potentially misleading measure of a tenant’s creditworthiness. Bank statements detail transactions – money going in and money going out. They make no reference to whether bills are being paid on time, in full or at all.
An alternative exists under the Credit Reporting Privacy Code 2004. A credit report contains more information on an individual including:
recent payments made to credit providers (such as banks or finance companies)
recent payments made to utilities (such as telcos and electricity retailers)
recent defaults or missed payments.
A credit report may seem to reveal more information than strict “credit” history data and you could be forgiven for thinking this is a peculiar thing to encourage under a code connected to the Privacy Act. However, the rationale is fundamentally pro-consumer in that it allows a wider range of credit information to be provided to entities looking to offer consumers a service. They can make a more meaningful assessment of a consumer’s risk profile. This is referred to as “comprehensive credit reporting”.
Comprehensive credit reporting includes positive and negative credit information. This means the fact I pay my electricity bill on time counts in my favour (positive reporting) when I apply for credit, rather than simply the credit card payment I missed four months ago (negative reporting) being the only piece of data on which a credit provider can assess me.
The idea behind introducing comprehensive reporting is that, along with lenders getting a better picture of a consumer’s credit information, those who would’ve been denied credit from mainstream lenders when the focus was on negative reporting (either because of a negative credit history, or because they had no credit record to view) can access credit based on this broader data set.
Credit providers can also tailor offerings based on an individual’s risk profile. The hope is that while an individual with a couple of speed bumps on their credit report may be offered credit at a slightly higher interest rate than someone with a spotless report, at least that first individual can access credit from a mainstream first-tier lender, rather than being forced to access credit from less reputable sources with higher interest and penalty rates.
There are three credit reporters in New Zealand. The code requires these reporters to provide individuals their credit report free if they ask for it. We recommend you check your report regularly. If you find something inaccurate, you have the right to have it corrected, or noted that you dispute the record. Doing this health check regularly could save you being denied credit on the basis of a mistake. More detail on requesting reports and your rights is available here.
Prospective landlords are specifically called out in the code as one of the groups to which credit reporters can disclose your credit information. Importantly, you need to consent to the information being released and the landlord needs to be accessing your credit information for the purpose of assessing your creditworthiness as a tenant. If the landlord is acting outside this purpose, they could be in breach of both the code and the Privacy Act.
In addition to requiring a legal purpose to collect personal information, under the Privacy Act, a landlord must not collect personal information from a tenant in an unfair, unlawful, or unreasonably intrusive way – and then they may only use that information for a lawful purpose connected with their function.
As a rule, a bank statement will contain more personal information than is necessary to make a decision on the tenancy application. Landlords should request a credit report instead.
If landlords are collecting bank statements from tenants to make a determination on their money management, this may be unfair or unreasonably intrusive.
The Office of the Privacy Commissioner is concerned about this practice, particularly during a time when pressure on tenants is high. If we see these issues continue to arise, we will consider our options under the Privacy Act. Anyone concerned about the way their information has been collected can make a complaint to the Privacy Commissioner.