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Outdated credit laws are allowing debt-laden consumers to keep borrowing, a credit data collection group says. And one in ten Australians who owe money to lenders intend to borrow more to survive tough economic conditions, the study by Veda Advantage also finds.

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 survey published this week found.

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. “Having people borrowing money is the core of a healthy economy,” Mr Gration told AAP. “The government should be mindful of those families that are caught in a debt spiral. “We know that families in difficulty are often tempted to seek additional credit, but Australia’s existing privacy legislation prevents credit providers having full insight into whether applicants are over-committed at the time they apply.”

Any change to the privacy laws could put debt-burdened borrowers at more risk, the Melbourne-based Consumer Action Law Centre (CALC) says. CALC 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. “It doesn’t necessarily mean that lending is responsible. If you don’t have a standard around what you can use that information for? “There’s a really large risk that it could lead to irresponsible lending.”

“You can reduce the default rate, or you can lend to more people at whatever default rate you feel comfortable with.”

Ms Rich says credit providers want the privacy laws changed so they can `launder’ marketing lists out of credit reports. “They have these databases of people they market to, and what they like to do is take those lists of names and addresses and wash them through a credit report. “You essentially weed out people you don’t want to send offers to. It’s making you’re marketing more attractive.”

The Veda Advantage study of 1,056 Australians found that almost half of those surveyed had reduced their personal debt when compared to 12 months ago, but 80 per cent were worried about paying future bills.