Responsible lending debate postponed till May

The National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 – which focuses on amending the credit laws so that they remove responsible lending obligations (RLOs) and extend the best interests duty to more credit assistance providers, among other changes – will not be debated in Senate until the next period of sittings.

After being introduced into Senate on Tuesday (16 March) and read for a second time, the debate for its second reading was adjourned.

It’s the latest delay for the bill, which has been met with criticism from consumer groups and members of the Labor and Greens parties.

Despite the final report of the Senate economics legislation committee inquiry recommending that the bill progresses, and the bill passing the House of Representatives on Monday (15 March), this week the Senate adjourned the debate for the second reading until the first day in the next period of sittings. This is set for 11 May 2021, according to the Senate Journals.

The Senate has seen much of its business this week taken up with industrial relations reforms, and government also currently has its hands full preparing for the May federal budget.

Senators have, however, been meeting with members of the banking and finance industry to discuss the government’s proposed overhaul of credit rules, and how lenders will ensure consumers are protected.

Consumer group CHOICE welcomed the “unexpected” development, highlighting that it followed more than 33,000 people signing an open letter opposing the reforms. 

In the second reading speech for the bill, Senator Zed Seselja, senator for the ACT and Minister for International Development and the Pacific, highlighted that the bill does “maintain strong consumer protections”.

He said: “To improve the flow of credit to the economy, the bill amends the Credit Act so the existing responsible lending obligations apply only to small amount credit contracts (SACCs) and consumer leases.

“This bill will replace the prescriptive one-size-fits-all approach that has evolved in relation to the interpretation of responsible lending and provide flexibility for lenders to assess each applicant for credit on a case-by-case basis. However, this flexibility will not diminish the consumer protections in place and, for some products, enhances these protections.”

Mr Seselja continued: “The new framework will allow all lenders to streamline and improve their credit assessment processes and rely on information provided by consumers unless there are reasonable grounds to believe the information is unreliable.

“These changes maintain strong consumer protections. Lenders that fail to comply with the credit assessment processes they have put in place will breach their standards, giving borrowers access to AFCA for free dispute resolution and restitution.

“Protections are being increased on services offered by credit assistance providers, with the bill expanding the best interests obligations – already scheduled to be applied to mortgage brokers from 1 January 2021 – to other credit assistance providers. This will ensure credit assistance providers act in consumers’ best interests and place consumers’ interests before their own.

“The bill also improves consumer outcomes through the introduction of new obligations for providers of SACCs and consumer leases,” he noted.

[Related: MPs go head-to-head over responsible lending bill]