This submission is from Consumer Action Law Centre, Financial Rights Legal Centre, Victorian Aboriginal Legal Service, CHOICE, Financial Counselling Australia, Consumer Credit Law Service (WA) Inc, Uniting Communities Consumer Credit Law Centre SA, Care and Consumer Law Centre ACT, Indigenous Consumer Assistance Network.
Our submission refers to the proposed amendment to Prudential Standard APS 220 Credit Risk Management (APS 220), announced by letter from John Lonsdale, Deputy Chair of Australian Prudential Regulatory Authority (APRA), to all authorised deposit-taking institutions (ADIs) dated 9 December 2020 (Consultation Letter).
The proposed amendment to APS 220 is in response to the Government’s plans to remove responsible lending obligations for all consumer loans (except loans under $2,000 and consumer leases), and is subject to the passage of the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 (the Bill). The amendment to APS 220 (the Amendment) would add a single sentence to paragraph 41: “For exposures to individuals, an ADI must assess the individual’s capacity to repay credit without substantial hardship.”
In the Consultation Letter, APRA confirms its view that this Amendment is ‘consistent with APRA’s existing requirements’, and will not impose additional burden on ADIs. APRA has also confirmed that ‘the proposed changes to the new APS 220 will not change APRA’s approach to supervising ADI lending practices, or enforcing this prudential standard.’ As such, it is clear to us that the Amendment will do nothing to improve consumer outcomes.
Consumer groups strongly oppose the Bill.
The Amendment is no replacement for the current responsible lending protections. Despite the Amendment, and gaping holes would remain in our lending consumer protection regime if the Bill is passed.
Read the full submission (PDF).210129_APRA APS220 Consult sub