Extension of the responsible lending exemption to SMEs

Treasurer Josh Frydenberg announced the government would extend the responsible lending exemption to SMEs, given the delays in the bill to repeal responsible lending laws.

In March 2020, Federal Treasurer Josh Frydenberg announced a six month exemption responsible lending obligations for small business credit to help speed up the time it takes for SMEs to access credit.

Speaking at the time, Mr. Frydenberg explained that while responsible lending obligations do not apply to loans used primarily for business purposes, lenders must do due diligence to confirm that the borrowed money responds to this test.

However, in order to allow lenders to “act quickly to support small businesses” during the COVID-19 pandemic, the government has decided to grant an exemption to this rule for a period of six months.

This exemption was to expire on April 2, 2021. However, taking into account the delay of the government’s bill to repeal responsible lending laws in its entirety, this has now been extended further.

Speaking on Friday March 19, the treasurer said: “As part of the government’s commitment to these reforms, the exemption for small businesses will be extended until the government secures the passage of its reforms. credit by the Senate.

“The extension will continue to provide the certainty and confidence necessary to enable small businesses to access credit quickly and efficiently.” “

Billing delays

The National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 – which focuses on changing credit laws so that they remove responsible lending obligations (RLO) and extend the duty of best interest to more credit providers, among other changes – will not be debated in the Senate until the next sitting period.

The delay occurs despite the final report of the Senate Economic Law Committee’s inquiry recommending that the bill move forward (albeit with dissenting reports from Labor and Green members), and the bill passed by the House of Representatives on Monday (March 15) .

However, after being introduced to the Senate on Tuesday, March 16, the Senate adjourned the debate for second reading until the first day of the next sitting period. This is set for May 11, 2021, according to the Journals of the Senate.

In light of this, the extension of the responsible SME lending exemption is expected to be in place until at least May 11, and until the bill receives Royal Assent.

This exemption will only apply to lenders who extend credit to existing small business customers, provided that there is an existing borrowing relationship and some of that credit is used for business purposes.

It will apply to new loans, increases in credit limits and changes and restructurings of credit.

However, the treasurer stressed that credit providers regulated by the Australian Prudential Regulation Authority (APRA) will remain subject to the prudential standards of the APRA as long as the exemption applies, and providers who subscribe to a code of law. industry will continue to be bound by this code.

Speaking of the In general, Frydenberg noted that the bill was passed by the House of Representatives on Monday (March 15), adding that he believed the credit reforms contained in the bill were “important to continue to enable l ‘Australian economy recovering from the COVID-19 pandemic’.

“The reforms will reduce the cost and time to access credit for Australian consumers and businesses, removing unnecessary barriers to accessing credit, which in turn will further facilitate economic activity,” Mr. Frydenberg.

[Related: Responsible lending exemption issued]

Extension of the responsible lending exemption to SMEs



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Last updated: March 19, 2021

Posted: March 19, 2021

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Annie kane

Annie kane

Annie Kane is the editor-in-chief of The Adviser and Mortgage Business.

In addition to writing about the Australian brokerage industry, mortgage market, financial regulation, fintechs and the broader lending landscape – Annie is also the host of Elite Broker and In Focus podcasts and The Adviser Live webcasts. .

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