In a strongly worded assertion, the heads of Choice, the Consumer Action Law Centre, Financial Counselling Australia and the Financial Rights Legal Centre hit out on the proposals which might see lenders’ accountability changed with the debtors’ accountability.
The 4 client teams had been key advisers to the Hayne banking royal fee, and offered numerous the case research examined throughout the year-long inquiry into misconduct in banking and monetary companies.
The Hayne fee didn’t advocate any adjustments to accountable lending legal guidelines in its closing report, discovering the provisions within the credit score legal guidelines and the banking code of conduct requiring banks to lend responsibly had been sufficient. Mr Hayne declined to touch upon the proposed adjustments when contacted by The Age and The Sydney Morning Herald on Friday.
But Karen Cox, the chief govt of the Financial Rights Legal Centre and a gap witness to the banking royal fee, lashed out the proposals.
“The problem people are having right now is too much debt and not enough income,” she stated. “The
authorities’s answer is to [have them] tackle extra debt with fewer protections. Unsustainable debt hurts
actual individuals and is a short-sighted repair for a flailing financial system.”
“Watering down credit protections will leave individuals and families at severe risk of being pushed into credit arrangements that will hurt in the long term,” Ms Cox warned.
“How can we have so quickly forgotten the hard lessons from the GFC and the Hayne royal commission?”
To make [buyer beware] the precept that guides lending in the course of a recession has catastrophe written throughout it. Piling extra debt onto individuals who can’t afford it has by no means solved an financial disaster.
Choice CEO Alan Kirkland
Choice chief govt Alan Kirkland stated the thought of “buyer beware” had been faraway from client regulation many years in the past.
“To make it the principle that guides lending in the middle of a recession has disaster written all over it,” he stated.
“Piling more debt onto people who can’t afford it has never solved an economic crisis. Banks are in a much better position to assess a person’s ability to repay, so they need to shoulder some of the responsibility.”
Gerard Brody, CEO of the Consumer Action Law Centre, stated the Commonwealth Bank not too long ago stated the movement of credit score was above pre-COVID ranges. Lending was rising at a powerful tempo, “and none of the big banks opposed the responsible lending laws at the recent House of Economics committee hearings.”
Greens Senator Nick McKim stated the federal government would face a battle within the Senate to get the banking adjustments by way of.
“The day after Westpac received the largest corporate penalty in Australian history, the government is changing the rules to benefit the banks,” he stated.
“Looser lending standards will result in higher profits, higher dividends, and more money flowing into the most overpriced housing [market] in the world. This is not the pathway to recovery.”
The Banking Code of Conduct, an enforceable business code, additionally features a accountable lending provision.
The Australian Bankers Association conducts three-yearly evaluations of the code.
“The ABA will run an independent review of the code in 2021 to ensure it reflects the credit law reforms, remains current and continues to deliver real benefits to customers,” a spokesman for the ABA stated.
The proposed adjustments come after a key court docket case final 12 months towards Westpac discovered that banks might use a normal benchmark reasonably than their private circumstances when assessing a prospects’ bills and never be in breach of their accountable lending necessities. However, the case didn’t look into accountability of lenders outdoors of that slender framework.
Sarah Danckert is a enterprise reporter.