APRA chair Wayne Byres has defended the role the Australian Financial Complaints Authority will play under the government’s proposed changes to responsible lending laws, saying it can impose binding rectifications on its member organisations.
Byres was appearing before the House of Representatives Standing Committee of Economics yesterday, when the committee’s deputy chair, Labor MP Andrew Leigh, said a significant weakness in the government’s plan was that it takes away a consumer’s right of redress through legal action.
The National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2019 was passed in the House of Representatives last week and is now before the Senate.
The bill removes the responsible lending provisions from the Act (which are supervised by ASIC), except where they apply to high-risk lending (such as small amount credit contracts and consumer leases), relying instead on APRA’s prudential supervision to regulate lending practices.
Lenders will be entitled to rely on the information provided by borrowers, in the absence of reasonable grounds to suspect that information is unreliable. This would replace the current “lender beware” approach with a “borrower responsibility” approach.
The change would limit a person’s right to take legal action for compensation for a breach of responsible lending standards.
A criticism of the bill is that while ASIC is a conduct regulator, APRA is a prudential regulator and will not police lenders’ practices.
Byres said the primary means for addressing complaints about responsible lending, under the government’s proposed changes, would be by submitting a complaint to AFCA.
“AFCA is more than an ombudsman. It can impose binding rectifications. It can refer systemic matters to us,” Byres said.
When it was put to him that AFCA was a poor substitute for ASIC in dealing with these issues, Byres said he could not comment.
The Consumer Action Law Centre has said that AFCA’s rules limit its ability to consider complaints about credit risk.
Labor is opposed to the responsible lending changes. Labor members of the Senate Economics Legislation Committee produced a dissenting report on the bill, saying: “It is clear that the changes in the bill will overwhelmingly benefit one side of the lending market: banks and lending institutions. Legislation should be used to ensure fairness, rather than benefit the major banks.”