Scrapping lending laws would take away legal rights and hinder economic recovery
Consumer advocates have published a submission on exposure draft legislation that would repeal lending consumer protections in the National Consumer Credit Protection Act, in direct contradiction of the first recommendation of the Financial Services Royal Commission.
The submission provides detailed analysis, including case studies, about the concerning implications of the Federal Government’s proposals for the community.
Scrapping the laws would:
- Remove people’s legal rights against lenders and brokers in relation to lending misconduct—the proposals would remove a borrower’s right to take legal action for compensation for breach of lending standards. This significantly reduces consumer rights.
- Reduce incentives for lenders to comply with lending standards—the proposals reduce the likelihood that lenders would face court penalties for breach of lending standards. For the largest banks, the ability for regulators to take court enforcement action for lending misconduct would be almost entirely removed.
- Weaken credit assessments—the proposals reduce the requirements for lenders and brokers to fully check information on loan applications and ensure loans are suitable.
- Create regulator confusion—the proposal radically disrupts the regulators, giving APRA sole oversight over bank lending while giving ASIC power over non-bank lending. There will be inconsistent rules between the regimes, with different consequences for misconduct. This means there will no longer be a level-playing field between banks and non-bank lenders.
“If these changes are enacted there will be a greater risk of over-indebtedness, affecting not only vulnerable individuals and families but the nation as the Government risks extending the COVID-19 recession,” said Gerard Brody, CEO Consumer Action.
“Australia already has the second highest level of household debt in the world, and the International Monetary Fund has found that high household indebtedness can lead to prolonged recessions. We should be working towards a sustainable recovery that lifts us up, not one driven by more debt.”