It has been announced that responsible lending will be scrapped leading to less onerous credit rules to encourage the flow of loans and boost the economic recovery from the COVID-19 recession.
In a shift from “lender beware” back towards traditional “borrower beware”, Treasurer Josh Frydenberg will dump the responsible lending law that was imposed by the Rudd Labor government in 2009 following the American subprime loan crisis.
“What started a decade ago as a principles-based framework to regulate the provision of consumer credit has now evolved into a regime that is overly prescriptive, complex and unnecessarily onerous on consumers,” Treasurer Frydenberg said.
Frydenberg concluded: “These changes will make it easier for the majority of Australians and small businesses to access credit, reduce red tape, improve competition and ensure that the strongest consumer protections are targeted at the most vulnerable Australians.”
It is understood that the intention is to allow lenders to rely on information provided by borrowers and simplify the loan application process by ensuring obligations are proportionate with the risk.
The government will now commence public consultation with stakeholders before finalising any legislation required to implement the reforms. It is hoped the new legislation will be in place by early next year.
Loan applications have been on a steady rise since January, before the pandemic hit, and are higher now than in October last year. This spike is no doubt lead by low interest rates and Australians having time on their hands to consider refinancing.