New data retention challenge for Banking/Finance sector

A new Credit Reporting Code was introduced in Australian on July 1, 2022, providing a new and additional layer of complexity for banking and financial institutions seeking to comply with records management obligations.

The new code addresses amendments to the Privacy Act to introduce a separate category of Financial Hardship Information which can now only be retained for 12 months.

A financial hardship arrangement is an agreement between a borrower and a lender to adjust the borrower’s loan repayments because something unexpected has happened which has a big impact on your ability to repay. Payment deferrals caused by natural disasters are good examples of when this might happen, but other circumstances such as illness or relationship breakdown might also lead to such an outcome.

A Records Management specialist with banking sector experience warns that this will be a challenging exception to implement into existing business systems.

“It does indeed create extra complications when either sentencing physical client files or attempting to automate conflicting retention policies enterprise-wide,” they said

“In the financial services sector, existing client files attract a retention of 7 years. And that is after the account is closed. Automating this exception to occur after one year will mean designing and building multiple decision points for successful selective culling of a client file.

“Selective culling of information from a file, prior to the file’s actual scheduled disposal date, is not an orthodox management practice. Maintaining regulatory compliance, however, will continue to pivot any contrary operational practices.

“Mind you records/content containing personal data already have lower maximum retentions than statute legislation’s minimum retention! It's an existing and ongoing challenge globally, to achieve full retention regulatory compliance which covers the privacy exceptions.”

The change to the Code also impacts the three major credit reporting bodies in Australia, illion, Experian and Equifax, which must now remove financial hardship information from individual credit report safter 12 months (compared to 24 months for regular repayment history information) so that a temporary setback doesn’t have a lasting impact on your credit report.