The Labor government is committed to maintaining current responsible lending obligations, improving safeguards for consumers taking out payday loans and consumer leases, and regulating buy now pay later products as credit.
Assistant Treasurer and Minister for Financial Services, Stephen Jones, said Labor was “gob-smacked” when the previous government introduced legislation to remove responsible lending provisions from the National Consumer Credit Protection Act, 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 would have been entitled to rely on the information provided by borrowers, in the absence of reasonable grounds to suspect that information is unreliable. This would have replaced the current “lender beware” approach with a “borrower responsibility” approach.
The bill was not passed before the election was called and has lapsed.
Speaking at the Responsible Lending and Borrowing Summit yesterday Jones said: “Any cursory understanding of markets tells us that consumer rights make them more efficient. The Albanese government’s approach to economic reform will have consumers at its centre.
“We won’t be revisiting responsible lending obligations in government.”
On the issue of payday lending, Jones said Labor would act on changes to rules covering the sale of small amount credit contracts and consumer leases that “the previous government sat on for five years.”
In 2017, the government accepted many of the recommendations of the Independent Review of Small Amount Credit Contract Laws. In particular, the review said the amount of income a Centrelink recipient should be allowed to commit to a payday loan should be reduced from 20 per cent to 10 per cent and that this cap should be extended to consumer leases.
It also recommended caps on lease charges and a ban on door-to-door selling by lessors and credit assistance providers.
A bill that included a watered-down version of the recommendations was introduced in 2020 but never passed.
“In opposition, Labor pushed strongly for these reforms. It is committed to taking action to strengthen consumer protection,” Jones said.
And, as has already been widely publicised, Jones committed the government to regulating BNPL.
“Let’s have an end to the silly argument about whether BNPL is credit and get on with the next stage of growth for this emerging industry.”
He said the government would soon begin consulting with stakeholders on how to regulate BNPL and improve the regulation of credit generally.
“BNPL products are unique and any future regulatory framework needs to reflect that. We will take a careful and deliberate approach that balances the need to protect consumers with encouraging innovation in our financial services industry.
“BNPL plays an important role in providing low cost and convenient credit to consumers. However, we must be mindful of the risks that may arise from innovation and ensure our regulatory frameworks remain fit for purpose in light of evolving technologies and business practices.”