The following is the opening statement from Consumer Action CEO, Gerard Brody at the public hearing on ASIC’s responsible lending guidance held in Melbourne on Monday, 19 August 2019.
I’m Gerard Brody, CEO at Consumer Action Law Centre. With me is Amanda Storey, our Director of Legal Practice and Brigette Rose, Senior Policy Officer.
Consumer Action is an independent, not-for profit consumer organisation with direct knowledge of people’s experiences through our phone advice lines and casework. Our financial counsellors run the National Debt Helpline in Victoria and our lawyers provide legal advice through our legal helpline and in representing clients.
Our primary point today is that the regulatory guidance should be based on what the law actually says and help clarify aspects of what means to lend responsibly. While the law is principles-based, it appears to us that the recommendations offered by lenders, including most of the major banks and the Australian Banking Association (ABA), reiterate that a principled approach to responsible lending is not working. More clarity and detail is required.
However as noted by Commissioner Hayne in his interim report, responsible lending isn’t about loan serviceability and a lender’s credit risk appetite. These assume a proportion of borrowers will default.
It’s about compliance with the legal requirements to ensure a credit contract is not unsuitable for the individual consumer – that it is affordable for the consumer without putting them into substantial hardship and it meets their requirements and objectives.
This is our primary concern with the decision from the Federal Court last week – that it seems to suggest the law doesn’t require lenders to look at the position of the individual applicant in front of them, to look at that applicant’s requirements and objectives, and whether the repayments will cause hardship for that particular applicant.
We look forward to answering your questions.