Commonwealth Treasurer Josh Frydenberg has announced that the government will move to simplify the credit process, by scrapping responsible lending obligations from the National Consumer Credit Protection Act 2009 (NCCP), with the exception of small amount credit contracts (SACCs) and consumer leases.
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The proposed reforms also involve a shift from a “lender beware” model to a “borrower responsibility” model, allowing lenders to rely on the information provided by borrowers.
These changes, in effect, remove the Australian Securities and Investments Commission’s (ASIC) responsible lending remit, with the regulator no longer authorised to exercise its enforcement powers.
However, the government has stressed that lenders would still be subject to regulation from the Australian Prudential Regulation Authority (APRA), which will continue to issue guidance regarding sound credit assessment and approval criteria.
Key elements of APRA’s guidance would also be applied to non-banks, currently bound by NCCP obligations enforced by ASIC.
The government’s reforms also aim to protect consumers from the “predatory practices of debt management firms” by requiring them to hold an Australian Credit Licence (ACL) when they are paid to represent consumers in disputes with financial institutions.
The changes also include a move to remove ambiguity regarding the application of consumer lending laws to small-business lending.
“Credit is the lifeblood of the Australian economy, with billions of dollars in new credit extended to households and businesses in Australia each month,” Treasurer Frydenberg said.
“Now more than ever, it is critical that unnecessary barriers to accessing credit are removed so that consumers can continue to spend and businesses can invest and create jobs.
“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 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.”
The government will now commence public consultation with stakeholders before finalising any legislation required to implement the reforms.
If passed, the proposals would take effect from 1 March 2021.