The Member for Fisher says brokers back the bill repealing responsible lending laws, while the Opposition Whip told the house mortgage brokers oppose it.
Speaking in the House of Representatives during the debate for the second reading of the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 yesterday (25 February), politicians continue to voice the pros and cons of the ramifications of the proposed changes.
Among those speaking in the house was Liberal MP for Fisher, Andrew Wallace, who outlined that the repeal of responsible lending laws was needed to free up credit and “replace the increasingly complex guidance provided by regulators and to get the flow of credit moving again”.
Indeed, Mr Wallace outlined that he had spoken to several finance broker constituents who had backed the repeal.
He told the House of Representatives: “Finance brokers in Fisher have described to me how the Gillard government’s responsible lending laws took a noble concept and turned it into a bureaucratic nightmare.”
He continued: “To be fair to the Gillard government, the responsible lending regime was not intended to be as onerous as it has become. Nor was it intended to apply to small-business loans. However, in the strict regulatory environment that has understandably followed the financial services royal commission, the reality has become very different.
“Regulators and loan providers alike have become substantially overcautious, introducing requirements that go far beyond the basic legislative tests and spreading responsible lending practices to all kinds of credit.”
He later stated that finance brokers had come to him “in absolute despair” – as had people who have applied for home loans – regarding the interrogation of discretionary expenses. He cited examples of brokers and consumer telling him that the banks had been “reviewing how much they are spending at a coffee shop each month and how much they’re spending at Domino’s or a pizza shop each month”.
“Applications for finance can now take eight weeks to assess, with more than half of that time spent trawling through existing expenses, which tell us little or nothing about an individual’s capacity to pay,” he said.
“Anyone who has ever taken out a mortgage knows that your lifestyle when you have the debt is very different to what you have experienced before,” Mr Wallace added, highlighting Justice Perram’s judgement in the Westpac v ASIC case: “I may eat wagyu beef every day washed down with the finest shiraz, but if I really want my new home, I can make do on much more modest fare.”
The MP continued: “[T]he bill will allow lenders to apply flexible processes that are appropriate to the borrower and the type of product offered. It will also allow them to rely on the information provided by consumers, unless there are reasonable grounds for believing it to be unreliable.
“This will remove the sword hanging over the heads of those who write loans and will streamline the approvals process to deliver faster and fairer outcomes for all Australians.”
He concluded: “Hardworking Australians with no record of defaulting on credit are in some cases unable to get a mortgage to buy a home. Successful construction businesses in my electorate of Fisher cannot get a loan to buy much-needed equipment which will help them grow their business. In those sorts of circumstances, the current regulations, if left unamended, are a handbrake on our economy, on our businesses and on innovation.”
However, the Opposition Whip, Joanna Ryan (MP for Lalor), retorted that brokers in her constituency had not backed the bill.
She said: “The legislation before us has no friends. The big banks haven’t asked for this and the community legal centres have been at pains to explain to us why this will be a disaster for vulnerable people in our communities, and even for the not-so-vulnerable people in our communities... I’ve even heard from my local mortgage brokers; they don’t like this piece of legislation either. And the academics don’t like it.”
She later added that some brokers had concerns regarding the disparity being caused by the best interests duty (which the bill proposes extending to all credit assistance providers writing consumer credit).
She said: “I sat with mortgage brokers in my community and I listened to their concerns about some of those recommendations. I just want to share with the house a mortgage broker’s response to this. He’s written to me to say that he’s obliged to put the customer’s interests first, but this legislation will mean the banks don’t have to. They won’t be held to the same standard as a mortgage broker,” she said.
Ms Ryan concluded: “This is about credit for individuals. This is about people being able to take out loans to get through this week but, beyond this week, only driving themselves down into a debt cycle. The impacts will be very real, and the government are being incredibly irresponsible to even think about bringing this into the Parliament,” she said.
The Senate economics legislation committee will also delve into the responsible lending bill today (26 February), as it holds its second hearing into the matter.
The hearings today will delve into the submission from Commercial & Asset Finance Brokers Association of Australia, as well as financial regulators and Treasury.
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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