The broker association has voiced “serious concerns” of splitting bank and non-bank oversight between APRA and ASIC under proposed credit reforms.
The managing director of the Finance Brokers Association of Australia (FBAA), Peter White, has outlined his concerns surrounding the changes proposed under the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020.
The bill, which is currently under Senate inquiry and was scrutinised in hearings and debate in both Senate and the House of Representatives last week, focuses on amending the credit laws so that they remove responsible lending obligations (RLOs) and extend the best interests duty to more credit assistance providers, among other changes.
The chief intention of the removal of the RLOs, as set out by the federal government, is to reduce the time it takes for individuals and small businesses to access credit and streamline lending regulation.
As Liberal MP for Fisher, Andrew Wallace, outlined last week, it seeks to do this by “replac[ing] the increasingly complex guidance provided by regulators”.
Should the bill pass, it would largely remove the Australian Securities & Investments Commission’s (ASIC) oversight of the lending decisions of authorised deposit-taking institutions (ADIs).
The Australian Prudential Regulation Authority (APRA) would continue to regulate banks and other authorised deposit takers in accordance with existing standards.
However, ASIC would continue to oversee providers of credit that are not APRA-regulated banks, such as non-bank lenders.
Mr White said that while the association supports “in principle” what the government is trying to achieve with consumer lending, it had “serious concerns” regarding the changes in regulatory jurisdiction.
The FBAA MD said that while the repeal could “remove unnecessary roadblocks” in the provision of credit, the inconsistency in jurisdictions could cause issues.
Mr White said: “It’s misleading to say that responsible lending has been ‘thrown out’. It’s only the jurisdictions that have changed... The problem is the jurisdiction of banks being governed by APRA and non-banks governed by ASIC.”
“While we have no issues with the banks being governed by APRA, this separation means there is a significant risk to the credit criteria being unfair due to the overcautious requirements that ASIC still have in place.”
He added: “These things would be easier to accept if ASIC didn’t try and overrule the law, but the risk of them doing this with their guidance makes trying to support them very problematic.”
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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