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Commercial lending ‘too dynamic and complex’ for NCCP

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Reporter 5 minute read

A broking industry body has warned that business loans “are not easy” and are “too dynamic and complex” to be regulated by the National Consumer Credit Protection Act.

Following on from ING DIRECT’s claims that brokers can “triple revenue” through commercial lendingPeter White from the Finance Brokers Association of Australia (FBAA) said that while commercial lending can represent a potential opportunity for brokers to capitalise on, “they have to have the right training and skills to do it”.

Speaking to The Adviser, Mr White said: “One of the things that concerns me, and I’ve said it before, is when lenders say commercial loans and business loans are easy… They’re not. You have to understand people's businesses.

“I’ve specialised in this area myself, in commercial lending, and it does take a certain skill set and expertise. You do need to be properly educated to understand what you’re looking at; the dynamic and the interplay with the lender and the structure of various facilities a business person may have and/or need. [It] isn't a tick and flick like a home loan. It’s a lot more complex.”


According to Mr White, the complexity of commercial lending was part of the reason why business loans are largely unregulated. For example, if a loan is not predominantly for personal, domestic, or household purposes — such as a mortgage used by a company to invest in commercial property — the loan is not regulated under the NCCP (National Consumer Credit Protection Act).

He explained: “When we brought the NCCP between 2008-2010 and were drafting the Act with the Treasury, we were most adamant that commercial lending could never come under this proposed regulation because it's too dynamic and too complex. And it was agreed [that this was the case], which is why it is not there.

“That doesn’t mean people aren't up to the measure to do it.

"They just have to have the right training and skills to do it and understand the dynamics that sit underneath the complexities of commercial and business lending structures.”

Mr White continued: “Commercial lending is the deep end of the pool, you need to do a lot more learning, education and practical application because it becomes very specialised…


“So this is an opportunity for brokers to skill up and prove themselves to be an expert in this area. But, it’s key that brokers ensure they are properly skilled before they go into the deep end of that pool.”

[Related: Aussie commercial property market set to ‘take-off’]

Commercial lending ‘too dynamic and complex’ for NCCP
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