ASIC has said that it will be responsible for administering and enforcing broker BID rules if and when the responsible lending laws are repealed later this year.
The Australian Securities and Investments Commission (ASIC) appeared before the Senate economics legislation committee yesterday (25 March), wherein it was asked what role it would play if the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 passes.
The bill focuses on amending the credit laws so that they remove responsible lending obligations (RLOs) and extend the best interests duty (BID) to more credit assistance providers, among other changes.
Senator Jenny McAllister asked ASIC commissioner Sean Hughes about whether ASIC would focus on outcomes at the individual or consumer level in regulating the credit activities of non-authorised deposit-taking institutions (ADI) after noting that the Australian Prudential Regulation Authority (APRA) said recently that it will not have a direct focus on the outcomes at an individual or customer level should the bill pass.
Mr Hughes responded to the query by stating that ASIC will be responsible for administering the existing responsible lending rules in relation to small amount credit contracts and consumer leases.
Speaking about ASIC’s role, Mr Hughes told the committee: “ASIC will continue to have a role in relation to monitoring the compliance by lenders at an individual consumer level, admittedly using a different set of rules or standards, and that being in relation to non-bank or non-ADI, the conduct aspects of the prudential standards established by APRA.”
Furthermore, Mr Hughes said: “We will also be responsible for administering and enforcing the rules in relation to the best interests duty for mortgage brokers and other credit assistance providers.”
The commissioner added that ASIC will be responsible for administering and enforcing the rules in relation to credit repair firms or debt management firms.
However, Mr Hughes clarified that ASIC is continuing to focus on what its role would be in relation to non-ADIs should the proposed credit reforms come into effect.
“That is a topic or an area that we’re continuing to focus on in terms of the detail of that, alongside of APRA,” he told the committee.
When Senator McAllister asked if it is Mr Hughes’ understanding that APRA will set the standards, after which ASIC will enforce them with a “subset of the lending community”, and that the terms on which this would occur are yet to be established or finalised, Mr Hughes confirmed that this was correct.
Senator McAllister also asked how ASIC would ensure that individual loans would continue to remain fair and not put consumers in financial hardships if the credit reforms bill is passed.
Mr Hughes responded by stating that part two of the ASIC Act contains consumer protection provisions, which he said includes elements such as misleading and deceptive conduct, unconscionability, the design and distribution obligations (which commence on 5 October), and ASIC’s existing powers in relation to product intervention.
The ASIC commissioner concluded: “There are a suite of consumer protection tools and remedies that we will continue to apply irrespective of whether the responsible lending reforms do pass in the new world.”
“Now, assuming that those reforms do pass, we intend to continue to bring focus on consumer lending and individual consumer matters, where it’s appropriate to do so.”
The progression of the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 was recently delayed, after the Senate adjourned the debate of its second reading until 11 May.
This came despite the final report of the Senate economics legislation committee inquiry recommending that the bill progresses, and the bill passing the House of Representatives on Monday (15 March).
[Related: Bill to extend BID delayed again]
Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.
Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.
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