RLO changes would simplify loan process: ANZ

Appearing before the economics standing committee hearing for the Review of the Four Major Banks and other Financial Institutions on Friday (16 April), ANZ CEO Shayne Elliot was asked by committee member and Liberal member for Mackellar Jason Falinski whether he was in favour of the changes to the responsible lending obligations (RLO).

The National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 focuses on amending the credit laws so that they remove RLOs and extend the best interests duty to more credit assistance providers, among other changes.

Mr Elliott responded by stating that ANZ is “in favour of regulatory simplification” and “alignment” in the regulation.

“We are subject to all sorts of regulators and regulation. Anything we can do to simplify that is ultimately beneficial,” he said.

“It’s frankly easier to play in the market subject to one rule book rather than two.”

Mr Elliott explained that under the current RLO obligations, the lender has to operate according to “at least two rule books”, including from the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC).

“So, simplification and alignment are what we are interested in,” he said.

Mr Elliott suggested that were the proposed RLO changes to materialise, it would make the mortgages process “easier” for some borrowers, though he underscored that this would not be the case across the board.

Mr Elliott was asked about whether the proposed RLO changes would result in a decrease in the amount of documentation required by potential borrowers should the changes pass through Parliament.

He responded by stating that the current legislation requires a “one-size-fits-all” approach where irrespective of how long a customer has been with the lender, the lender is obligated to collect the same amount of information and documentation (such as payslips, income and expenses) and ask the same number of questions.

However, if the proposed changes were to be legislated, Mr Elliott said the bank would not require the same level of documentation.

“For example, if we’ve known you for 25 years, and you’ve been a good customer, and we’ve known your track record, and you only apply for a credit card, we may feel we don’t need to ask you the same level of questions as we would if you’re new to the bank,” Mr Elliott said.

“For some, it may well mean that they will get an answer quicker.”

However, Mr Elliott emphasised that it is the lender’s best interest (rather than just a regulatory obligation) to collect borrower information and ask them questions to ascertain their suitability for a home loan or a financial product.

Mr Elliott’s comments have followed those by Westpac CEO Peter King, who also told the committee last week that RLO changes could simplify loan processes and improve mortgage approval times.

CDR a chance to be customer-centric, says ANZ

Mr Elliott also suggested that the implementation and evolution of open banking and comprehensive credit reporting would mean that ANZ would be less reliant on asking borrowers for information.

“We will just know because if you give us access to your banking history, we can just literally search through your bank accounts and tell you what your monthly expenses are, and we won’t need to ask you,” Mr Elliott said.

However, he tempered this by stating that this has not yet evolved at the required level.

He concluded: “We’re not quite there yet. We’re getting better and better at it.”

“But certainly, that seems like a bright future and an opportunity to be really customer-centric, to do the right thing and make sure people borrow appropriately, and do it quickly and at a reasonably low cost.

The Consumer Data Right (CDR) – which underpins the open banking regime that came into effect in 2019 – enables individual and business consumers to access their own data or direct custodians to share their data with accredited entities such as banks.

Legislation to introduce CRD passed both houses of Parliament in 2019.  

Under a new stage of CDR implemented in November 2020, customers of the four major banks can now share their home loan and mortgage offset data to accredited recipients.

In a report released earlier this year into the Inquiry into Future Directions for the Consumer Data Right, it was recommended that third parties should be given “action initiation”, where they could initiate action beyond requests for data sharing.

In relation to mortgages, the inquiry added: “Switching may be greatly streamlined by enabling electronic lodgement of applications in standardised forms by accredited persons on behalf of consumers and could be enabled by action initiation.”

If such a change were implemented, accredited persons may be able to therefore design services that offer to undertake these actions independently, or in combination with, data sharing services, it added.

In October 2020, the Australian Competition and Consumer Commission (ACCC) launched a consultation on expanding the rules of the CDR to enable more financial services professionals and “trusted advisers”, such as brokers, to receive consumer data with consumer consent.

In December 2020, the competition watchdog released guidelines for those wishing to become accredited to access CDR data, including intermediaries. The guide outlined how applicants can lodge a valid application to become an accredited person.

[Related: RLO changes could boost turnaround times: Westpac]