Bank initiated credit card account closures, and the impact on customer access to historical account data

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Description

Credit card issuers often close accounts and replace them with new accounts for operational reasons, and to manage account profitability as outlined below. Such closes are not customer initiated, however, based on the current CDR Rules, will result in the customer losing access to their 7 years of credit card account history.

Examples of Accounts Closed for Operational Reasons:

1. Lost or Stolen cards – issuers on older credit card platforms still use the credit card number as the account number. When a card is report as lost or stolen, these issuers reissue the customer with a new card number (as the old one has been compromised), and hence a new account. Modern credit card platforms use an account number that is independent of the card number, therefore a new card can be issued without closing the account.
2. Credit card fraud – new card numbers (and hence accounts) are sometimes required in response to a fraud event, for example card skimming or a data breach.

Examples of Accounts Closed to Manage Account Profitability:

1. ‘Card-in-hand’ migrations – this is a very common tactic used by card issuers to improve account profitability, either by (a) accessing a higher interchange rate, or (b) changing card schemes (e.g. Visa to Mastercard) after a contract renegotiation. The issuer sends an existing credit card customer a new card, which may or may not be a new product. The new card has the same fees, interest rates and credit limit, however it will typically offer improved features, for example more reward points, to motivate the customer to activate the new card. When the customer activates the new card, their existing account is closed, and the new account takes over.

Given the above, it’s likely that the majority of credit card customers in Australia will have been issued with new accounts within any 7 year window, without having actively changed products. Further, given that the CDR Rules only require 7 years of account history to be retained for open accounts, the majority of customers will never have access to their 7 years of account history via the CDR.

Access to historical account data, such as transactional data, is critical to a data recipients ability to access issues such as credit risk and product suitability.

A similar issue may exist with other product types within the CDR

Area Affected

CDR Rules relating to the retention of of historical account data.
Credit card products, and potential other products with similar limitations.
APIs such as "get transactions"

Change Proposed

Two credible options exist to address the issue:

1. Data holders should be required retain 7 years of account history for both open and closed accounts
2. Data holders should be required 'stitch' together the data from sequential accounts to provide a full 7 years of history