Several leaders of aggregation groups have noted the government’s proposed changes to responsible lending obligations, outlining that consultation will now take place to determine the impact on brokers.
Late last week, the federal government unveiled its intention to overhaul credit practices, which includes the removal of certain responsible lending obligations from the National Consumer Credit Protection Act 2009 (NCCP).
The proposed lending reforms still have to be passed by Parliament and are not due to come into effect until March 2021.
While the specifics of the revocation are yet to be formulated (though a fact sheet has been issued to provide further context), the government said it will consult publicly with stakeholders before finalising any legislation required to implement the reforms.
As the industry digests the news, the industry associations and aggregator heads have been reassuring broker members that they will be consulting with the government over how the changes will impact the broking industry.
The executive director of Connective, Mark Haron, noted that “change seems to be a constant for our industry”, acknowledging that this particular announcement “landed with little warning”.
However, Mr Haron largely welcomed the news, stating that he believed that the proposed changes would “drive efficiencies and remove unnecessary complexity for consumers, lenders and brokers” while allowing brokers to focus on understanding and meeting customers’ needs rather than spending “excessive time on verification of consumer expenditure”.
The Connective executive director also said he thought the change would increase the value of the service brokers offer consumers by positioning brokers as “the highest level of protection for customers in the lending process”.
He added that the aggregator was “well equipped” to assess what the announcement means for the broking industry and “to inform and influence what the final outcome looks like, to adapt as required, and to support [broker members]”.
“Any change will not kick in until March 2021, at the earliest, and we’ll ensure we’re involved in all the consultations around the implementation,” Mr Haron said, adding that the aggregators would also remain connected with industry bodies, including the MFAA, FBAA and CAFBA, “actively lobby at a political level, as required, and ensure we’re involved in the consultation process”.
The Connective executive director also said that he expects there will be more guidance as to what the incoming best interests duty (BID) obligation “means in a world without responsible lending”, but encourage brokers to continue to prepare for BID to come into effect from 1 January 2021.
Likewise, AFG’s head of sales and distribution, Chris Slater, told The Adviser: “The proposed reforms are a positive step to help Australia recover and we will continue our work with the federal government to ensure our brokers are best placed to help Australians, who – quite frankly – need a lot of help right now.
“During one of the worst times our country has seen in recent times, our brokers have stepped up and are there for customers in local communities right across the country.
“With best interests duty on its way in, they are already operating with their customers best interests at heart and their livelihood is reliant on not putting their customers into unreasonable levels of debt, so we think it’s great news,” Mr Slater said.
Sam White, the executive chairman of Loan Market Group, also marked the “significant news” regarding the revocation of responsible lending obligations.
Mr White echoed the commitment to consult with government, stating: “Loan Market is speaking to regulators, government and lenders directly to understand how these changes will impact the way we operate and the timeline for reforms”.
Acknowledging the concerns voiced by consumer groups over the proposed changes, Mr White added: “One thing to keep in mind is that mortgage brokers will continue to be held to the new best interests duty that was a central recommendation of the [banking] royal commission.
“As BID will operate at a higher level than NCCP, consumers can have confidence in knowing that brokers are legally obligated to work in their clients’ best interests. Of course, lenders and banks do not have this obligation.
“We see this as further reasons why customers will continue to turn to brokers as their trusted adviser when they are making big decisions involving debt.”
The managing director of Finsure Group, John Kolenda, also publicly commented on the news, suggesting that the government’s plans would free up credit to boost the economy, noting the role that mortgage brokers had to play in this changed environment.
Mr Kolenda said: “The lending landscape, particularly since the [banking] royal commission, has been highly restrictive, complicated and confusing, with tighter lending regimes and forensic examination of borrower expenses significantly reducing borrowing power for consumers.
“Best interests duty reinforces the good practises that most in our industry already follow, and one important aspect to illustrate is that it clearly differentiates brokers from the banks,” he said.
“The only way a consumer can guarantee their best interests are the number one priority is to speak to an experienced finance broker.
“Brokers have been pivotal in introducing stronger competition in the lending market and giving customers choice,” the Finsure MD concluded.
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.
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