Senate committee split on responsible lending amendments

John Kavanagh

The Senate Economics Legislation Committee has split along party lines in its report on a bill to largely remove responsible lending rules from the National Consumer Credit Protection Act.

The majority of Liberal and National members has recommended that the bill be passed, saying the current operation of the rules is overly prescriptive and that APRA and the Australian Financial Complaints Authority have sufficient powers to guarantee lenders continue to lend responsibly.

The Labor and Greens senators issued separate dissenting reports. Labor says: “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.”

The Greens report says the government should honour its commitment to accept the recommendations of the Hayne royal commission, which include a recommendation that “the NCCP Act should not be amended to alter the obligation to assess unsuitability”.

The National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2019 removes the responsible lending provisions from the 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 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 bill also extends the best interest duty that currently applies to mortgage brokers to other “credit assistance providers”.

And it gives the responsible minister power to set non-ADI credit standards.

The government’s policy has been highly controversial. In November, 126 organisations published an open letter urging parliamentarians to oppose the “weakening of safe lending laws”.

Opponents of the change argue that the responsible lending obligations do not represent a significant barrier to obtaining credit.

However, the Senate committee majority group was “concerned by evidence that the regulatory framework has resulted in consumers being unable to access credit in a timely manner to buy their first home or to obtain a grant under the HomeBuilder scheme.”

The majority group also said it was “concerned about the invasive and onerous nature of the inquiry and verification processes required under the existing responsible lending obligations.”