Commercial Credit

Credit Reports contain vast information used by Creditors in determining credit worthiness. The Privacy Act 1988 as amended regulates consumer credit reporting. Consumer credit is defined as creditobtained wholly or predominantly for domestic and or household purposes.

What about commercial credit? For example a company or an individual with an ABN number setting up a trade account at a timber supply company if default listed for the nonpayment or late payment of an account is not afforded protection by the Privacy Act.

The distinction made between consumer credit and commercial credit is a constant source of aggravation for the writer as a large percent of listings appearing on credit reports are of a commercial nature able to be listed; with little comfort afforded to the afflicted party should the listing need to be challenged.

Credit reporting agencies are quick to advise commercial listings are not regulated by the Act but there is comfort as the same courtesy is extended to commercial listings as to consumer listings. This is certainly the case in matters in which the writer has been directly involved. However it must be noted commercial defaults are difficult to remove by way of correction should a problem with the listing be discovered.

Commercial individuals or companies should be cautious when entering into credit arrangements to ensure the terms adopted by the creditor prior to listing late or delinquent payers are fair and sufficiently disclosed prior to proceeding with such listing.  Should the terms in listing defaults adopted by the creditor be unfair or draconian in nature look elsewhere and do business with companies which adopt more equitable terms.

Traditionally creditor will list commercial defaults with established credit reporting agencies such as Veda Advantage or Dunn and BradStreet and in some cases a default may be listed with both agencies.  In recent times there has been a shifting trend away from credit reporting agencies in favor of companies which are quasi credit reporters and operate solely in the commercial credit arena so as to escape the watchful eye of the Privacy Act. These types of companies can prove to be quite damaging to any party listed by one of their subscribers, in that unlike the traditional credit reporters these quasi reports rarely follow the same type of protocol as would be followed in a consumer situation.
Typically, quasi credit reporting agencies record information provided to them by organizations that subscribe to their service. These types of organization are normally trade creditors’ institutional creditors or more traditional style creditors such as banks prefer to use established credit reporters such as Veda or D & B.

The question needs to be asked, how does one protect themselves from being listed by quasi credit reporting agencies? There is no quick solution to this problem. However, the following points may serve as a guide to protecting your credit worthiness.

  • Prior to doing business with a company check their policy with regards to the collection including their process of listing a late payment or nonpayment.
  • Make sure all invoices are paid on time.
  • If a problem is experienced communicate this problem to the creditor in writing, arrive at an alternative payment plan which is manageable and stick to it. Part of this collateral agreement would be the prevention of the creditor listing the late payment by way of default.
  • If the creditor’s terms as to listing overdue accounts are draconian do not do business with them choose another company.

Credit worthiness is paramount to financial well being even a small blemish recorded may in many cases be the difference between being approved or rejected for a loan or credit. Credit worthiness should be protected at all cost as the implications may see clients unable to borrow for up to (5) years and in some cases (7) years. The information contained in this article is general and for educational purposes only.  Specific problems should be referred to Joseph Trimarchi on (02) 9890 4811 AUSTRALIA WIDE or send an email at