Green Loans a dud for lenders

The Green Loans program proved to be almost as big a failure for the financial institutions that participated as it was for the government. Only a fraction of the loan volume anticipated was written and part of the government subsidy to the lenders was paid without proper authorisation.

The program, which involved household energy audits and access to interest-free finance for clean energy upgrades, was announced in the 2008 Federal Budget, went live in July of the following year and was put on hold in March this year.

Since then the program has been the subject of departmental, parliamentary and independent inquiries. Three reports were issued yesterday and in response to their damning assessments of the scheme Green Loans has been cancelled.

Twelve financial partners, most of them credit unions, signed up for the program in the expectation that they would get a share of a budgeted 75,000 loans of up to $10,000 each.

The lenders signed subsidy deeds, which entitled them to a $200 administration fee (in lieu of a loan establishment fee) and an interest rate subsidy - both paid by the Department of Environment, Water, Heritage and the Arts.

As things turned out there were only 800 loan approvals to the end of December last year. The Resolution Consulting report on the failed program suggests that take-up was lower than anticipated because households were unwilling to take on extra debt (even interest-free debt) during the financial crisis.

The financing side has proved to be as controversial as other aspects of the program. The original scheme arrangement allowed for a $150 administration fee for an unsecured loan and $50 for a drawdown on a mortgage. The change to a $200 fee across the board was made without ministerial approval.

Those payments are in breach of government guidelines and may be in dispute.