The federal government has been urged to deal with seven unresolved issues concerning the responsible lending rules.
FBAA chief executive Peter White said the National Consumer Credit Protection Act (NCCP), introduced in 2009, had struck an appropriate balance between rights and responsibilities, but needs clarification.
Mr White told Mortgage Business that the FBAA planned to lobby the federal government on the NCCP in 2015, although he could not yet reveal the association’s specific concerns.
“I’ve been fortunate to have had dinner with [Finance Minister] Mathias Cormann, and he’s put me in touch with his key guy to progress the issues that we have,” Mr White said.
“There are probably seven of them that sit under the NCCP that aren’t complete, or are discussion points that weren’t finalised, or are issues that we feel need to be dealt with – to either say, ‘no, go away’ or ‘yes, we’ll do something about it’.”
Mr White said that leaving grey areas in the legislation could encourage some firms to engage in potentially harmful practices.
Meanwhile, Mr White said the FBAA was also likely to make a submission to the Financial System Inquiry warning of the dangers of SMSFs. He said the association had hired two specialists to investigate SMSF lending, then lead any lobbying efforts should their report confirm the sector has got out of hand.
“If they’ve got research that confirms that the weighting of property in SMSFs is skewed too far on one side, we’ll be saying this shouldn’t be allowed to happen,” he said.
Mr White said he was not opposed to SMSFs, but that they appeared to be too heavily focused on property.
He added that innovative forms of lending that can seem good in theory can become distorted in practice, as occurred with low-doc lending and GRV (gross realisable value) lending.
“It could be the same with this kind of limited-liability borrowing – it was a good idea at the time, but it went left of centre and needs to get its horns pulled in,” he said.
The closing date for submissions to the Financial System Inquiry is March 31.