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The Senate is accepting submissions to its inquiry into the repeal of responsible lending and the extension of the best interests duty obligations.
Last week, the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 was recently introduced and read for the first and second time.
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The bill relates to the government’s previously announced consumer credit reforms and includes the proposal to scrap responsible lending laws and extend the best interests duty to more credit assistance providers.
While the finance and property industry have been largely supportive of the repeal of the responsible lending obligations – citing its ability to improve the flow of credit and reduce the amount of red tape in the loan writing process – members of the Labor Party, senators and consumer groups have all opposed the move.
Given the concerns, the Senate has now referred the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 to the Senate economics legislation committee for review.
Submissions are now being accepted as part of this inquiry, with a deadline of 3 February 2021.
The Senate is expected to report back to the chamber on 12 March 2021.
Senator Katy Gallagher, Labor senator for the ACT and Manager of Opposition Business in the Senate, said: “The reason we would like this is that this bill reverses the first recommendations of the banking royal commission: that the government should not touch the responsible lending laws.
“If the government is serious about scrapping the responsible lending laws, we need a chance to find out what the harm to consumers will be.
“Eliza Wu, associate professor of finance at the University of Sydney, has said these laws may sow the seeds for the next financial crisis. So, I think it is reasonable that the Senate be given the time for a relatively short inquiry, once you take out the Christmas break, to report back to this chamber by 12 March.”
Thirty-one Senators agreed to the motion, with a majority of two.
The committee is now accepting submissions to this inquiry, but has outlined that it is not obliged to accept every document it receives as a submission and that submissions are confidential until the committee releases them.
While the Senate will be focusing on the removal of responsible lending obligations, the bill also includes the proposal to extend the best interests duty to more credit assistance providers.
The explanatory memorandum for the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 outlines that the amendments about the best interests obligations will commence six months after the bill receives royal assent.
Given that the Senate inquiry is not expected to report back until 12 March 2021, it is unlikely that an expanded BID would therefore apply before 12 September 2021.
Mortgage brokers will be required to work under a BID from 1 January 2021, as previously legislated.
[Related: MFAA, housing sector back consumer credit reforms]
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