Defends the findings of the responsible lending inquiry

Consumer advocates and law academics have castigated support for a government-led probe to cut responsible lending, which they say would expose more everyday Australians to debt and debt. ‘crippling’ exploitation.

Although the proposed changes ignore the first recommendation of the Hayne Royal Commission, the report of the Senate Economic Affairs Committee (published Friday) found that they are required to reduce the time it takes consumers to access credit, thereby accelerating the post-pandemic economic recovery.

In its findings, the coalition majority committee said the current regulatory frameworks are “overly prescriptive” and complex.

As a result, he supported changes that would shift responsibility from lenders to borrowers and put the prudential regulator APRA and the Australian Financial Complaints Authority (AFCA) in charge of consumer oversight.

Labor and Green senators submitted dissenting reports, arguing that current consumer protections would be eradicated and that predatory lending and financial abuse rates could rise under the changes.

If passed, it would be the most drastic loosening of loan laws in a generation and reverse consumer protection. introduced by the Rudd Labor government in 2009.

Opponents warn the changes would support banks and inflate asset bubbles at the expense of vulnerable consumers.

Opponents of responsible lending say the rise in mortgage lending is enough evidence to show that current laws are not impinging on the flow of credit. Photo: Getty

Elise Bant, UWA professor of private law and business regulation, who was among a group of academics who opposed the reforms in November, said the government had not yet presented any evidence to support its rationale for the reforms.

I would love to see Scott Morrison sit down with Commissioner Hayne, look him in the eye and explain to him how it is [report] is consistent with the findings of the Royal Commission, ”Professor Bant told The New Daily.

“If you look at their claim of a lack of credit, for example, the royal commission, ASIC and the Treasury said there was no impact at different points, so this statement should be submitted to an exam.

“In fact, all of the evidence suggests that we are on the verge of hitting another hot real estate market and if responsible lending obligations are removed, it opens the door to the kind of catastrophic damage we saw during GFC.”

Professor Bant also highlighted the government’s claim that APRA and AFCA will continue to protect consumers ‘don’t stack up’ as the former is responsible for portfolio-wide financial stability issues and the second would not have a law to apply in the context of the reforms. .

Higher prices, less protection, say consumer advocates

Consumer Action Law Center CEO Gerard Brody agrees, saying the results “fly in the face” of testimonials that show how current loan laws are helping improve consumer outcomes.

“We are extremely disappointed with the majority report… it’s clear [the reforms] remove individual rights to challenge banks over their lending decisions and reduce the responsibility of lenders to lend responsibly, ”said Mr. Brody. The new daily.

According to the royal commission of inquiry, consumers received more than $ 350 million in compensation between 2010 and 2018 after banks and other lenders violated their obligations.

Karen Cox, CEO of the Financial Rights Legal Center, said the reforms were an outdated response to government concerns about the flow of credit, with new mortgage lending recently reaching historic highs.

“This bill will take consumer protection back a decade, let the banks fend for themselves again and expose ordinary Australians to more crushing debt,” Cox said..

Financial Counseling Australia CEO Fiona Guthrie said the report ignored the plight of those harmed by “irresponsible loans” who suffered family breakdowns, mental health issues and homelessness.

The amendments are expected to be debated in the Senate from Monday and The new daily understands that their passage is on a razor’s edge and that members of the Senate should decide their fate.

The changes, which were applauded by the banking sector, came after the infamous “ wagyu and shiraz ” mortgage case that the corporate regulator ASIC lost on appeal.

In fact, the reforms would impose more burdens on borrowers, as the need for banks to conduct “reasonable inquiries” into the availability and suitability of a loan would be eliminated.

AMP Capital’s chief economist, Dr Shane Oliver, said that while the changes do not present a problem in the short term, a return to “lax” lending standards could encourage borrowers to take on long-term debt. ‘they have no hope of repaying.

“The question is whether you really need to do that, given the risks involved in terms of the potential for possible excessive easing of lending standards, which regulators would then have to re-regulate,” Dr Oliver said. The new daily.

Other implications for domestic violence

Labor Senator Jenny McAllister, a member of the Economic Committee, said The new daily the elimination of responsible lending could have even greater implications rate of financial abuse.

“The existing arrangements offer important guarantees [that] can be very important in protecting women who may be coerced by their partners into taking on debt that is of no use to them and causing them harm, ”said Senator McAllister.

According to Victoria’s Economic Abuse Reference Group (EARG), 85% of domestic violence victims have experienced financial abuse, which can burden them with large debt and affect their credit rating.

EARG spokesperson Carolyn Bond said The new daily there could be untold damage to the victims by relaxing the laws.

She said it could give perpetrators the green light to commit more serious cases of financial abuse, as they have fewer barriers to coerce victims into taking out inappropriate auto loans, business loans or mortgages. .

And that’s because banks will be able to make “automatic” and “very quick” loan approvals as part of the reforms.

“We’re also very concerned that people don’t really have legal rights if they have an inappropriate loan,” Ms. Bond said.

“There are a lot of services out there that are really focused on helping people who are victims of domestic violence get out of financial conflict, and they feel [the reforms] would remove a very important tool from the toolbox when trying to help victims who have tens of thousands of dollars in debt. “

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