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SME responsible lending exemption extended

josh frydenberg josh frydenberg
Annie Kane 6 minute read

Treasurer Josh Frydenberg has announced that government will extend the SME responsible lending exemption, given the delays to the bill repealing responsible lending laws.

In March 2020, federal Treasurer Josh Frydenberg announced a six-month exemption for small-business credit from responsible lending obligations to help speed up the time taken for SMEs to access credit.

Speaking at the time, Mr Frydenberg explained that while responsible lending obligations do not apply to loans used predominantly for business purposes, lenders must undertake due diligence to confirm that the money borrowed meets this test.

However, in order to allow lenders to “move quickly to support small businesses” during the COVID-19 pandemic, the government moved to provide an exemption for this rule for a period of six months.


This exemption was set to expire on 2 April 2021. However, given the delay to the government’s bill to repeal responsible lending laws in full, this has now been extended further.

Speaking on Friday (19 March), the Treasurer said: “As part of the government’s commitment to these reforms, the small-business exemption will be extended until the government secures passage of its credit reforms through the Senate.

“The extension will continue to provide the certainty and confidence necessary to allow small businesses to access credit in a timely and efficient manner.”

Delays to the bill 

The National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 – which 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 – will now not be debated in Senate until the next period of sittings.


The delay comes despite the final report of the Senate economics legislation committee inquiry recommending that the bill progress (albeit with dissenting reports from Labor and Green members), and the bill passing the House of Representatives on Monday (15 March).

However, after being introduced into Senate on Tuesday (16 March), the Senate adjourned the debate for the second reading until the first day in the next period of sittings. This is set for 11 May 2021, according to the Senate Journals.

Given this, it is expected that the extension of the SME responsible lending exemption will be in place until at least 11 May, and until such a time that the bill receives Royal Assent.

This exemption will only apply to lenders who provide credit to existing small-business customers, provided there is an existing borrowing relationship and some proportion of that credit is used for business purposes.

It will apply to new credit, credit limit increases and credit variations and restructures.

However, the Treasurer emphasised that credit providers regulated by the Australian Prudential Regulation Authority (APRA) will remain subject to APRA’s prudential standards while the exemption applies, and providers who subscribe to an industry code will remain obliged to abide by that code.

Speaking of the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 generally, Mr Frydenberg noted that the bill passed through the House of Representatives on Monday (15 March), adding that he believed the credit reforms contained in the bill are “important for continuing to enable the Australian economy to recover from the COVID-19 pandemic”.

“The reforms will reduce the cost and time it takes to access credit for Australian consumers and businesses, removing unnecessary barriers to accessing credit, which in turn will facilitate more economic activity,” Mr Frydenberg concluded.

[Related: Responsible lending exemption issued]

SME responsible lending exemption extended
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Annie Kane

Annie Kane

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. 

Email Annie at: This email address is being protected from spambots. You need JavaScript enabled to view it.



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