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‘The bill is done’: Jacqui Lambie on RLO repeal

by Malavika Santhebennur13 minute read
‘The bill is done’: Jacqui Lambie on RLO repeal

The government said that it would continue to work with the Senate crossbench on responsible lending reforms after senator Jacqui Lambie said she would not support the repeal of the obligations.

The federal government revealed its consumer credit reform plans in September 2020, including scrapping responsible lending obligations from the National Consumer Credit Protections Act 2009, with the exception of small amount credit contracts (SACCs) and consumer leases.

The proposed reforms would involve a shift from a “lender beware” to a “borrower responsibility” model, which would allow lenders to rely on the information provided by borrowers.

While the proposals to wind back the obligations have been met with support from the finance and property industries as well as the Reserve Bank of Australia (RBA), who argue that the reforms would improve the flow of credit and reduce onerous red tape, senators, consumer groups and Labor Party members have expressed concern about the reforms.

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Senators against the reforms

Senator for Tasmania Jacqui Lambie has joined other senators and stated that she would not support the repeal of the responsible lending obligations, telling The Adviser in a statement that “this bill is done”.

Ms Lambie said: “I won’t be helping the boys’ club at the big end of town. They’re already making massive profits for their shareholders.

“You can bet they won’t do right by their customers if it costs their bottom line.”

Last week, One Nation senator Pauline Hanson indicated that she would also be opposing the repeal when it is voted on in the Senate, while independent senator for South Australia Rex Patrick also indicated that he would not support the bill, according to media reports.

The federal government would require three votes from the Senate crossbench to pass the legislation to repeal responsible lending obligations.

The bill is due to be debated in mid-June when the Senate is set to meet.

Banking, property industry support repeal

Responding to the senators’ stance, Treasurer Josh Frydenberg reiterated in a statement that the federal government would continue to work with the crossbench on the reforms “to help secure Australia’s recovery”.

He said: "The current regulatory framework, which was put in place more than 10 years ago, too often leads to delays in consumers receiving credit, potentially impeding their purchasing decisions.”

“It’s now more important than ever that our economic recovery is not held back by unnecessary barriers to the flow of credit to households and business.”

The federal government also noted that various banking and property associations had recently expressed their support for its proposed reforms, including the Australian Banking Association (ABA), Customer Owned Banking Association (COBA) and the Housing Industry Association (HIA).

The government said that in a Senate committee hearing in February, the ABA said this reform would result in less paperwork and time for borrowers rather than less scrutiny for lenders.

It said: “It means less reliance on obscure discretionary spending during the loan assessment and more attention on the factors that count, like income expenses and debt.”

“AFCA (the Australian Financial Complaints Authority) offers a free complaints service and has a broader remit and more powers than its predecessors.

“There are more remedies available to more customers with a complaint than existed a decade ago. The government’s reforms in this bill do not the affect the rights of customers to bring a lending complaint to AFCA.”

According to the government, COBA told the hearing that red tape duplication had placed a “cost burden” on financial institutions, and made it increasingly difficult to remain sustainable.

“I’ll just reference the fact that 20 years ago there were more than 300 customer-owned banking institutions,” COBA said.

“Ten years ago, there were about 150. We presently have about 67. That is partly because of the increased burden of regulation and compliance.”

The Housing Industry Association told the hearing that the time frame to assess mortgages surged in 2018.

“What we saw in the 2018 time frame was that the average time frame to assess a mortgage went from around two weeks to two months and the number of customers that were rejected for finance increased from between 7 and 9 per cent to between 17 and 19 per cent,” it said.

“The consequence of that is that we see a decline in home ownership.”

Lender tech slows mortgage process: Choice

However, consumer advocacy group Choice senior policy and campaigns adviser Patrick Veyret argued that the repeal of the responsible lending obligations would be “devastating for the Australian community”.

He also said that the Australian Prudential Regulation Authority (APRA) would be “ill-suited” to be a conduct regulator in this space.

“APRA itself has said that it wouldn’t prosecute individual breaches of irresponsible lending,” Mr Veyret told The Adviser.

“They wouldn’t have penalties, and they wouldn’t have the ability to take an individual bank to court. It would be such a shame if APRA were regulating consumer lending.”

Mr Veyret also argued that mortgage processes were being delayed due to the use of outdated IT systems by lenders rather than due to the responsible lending obligations.

He said: “The very same bank who are lobbying to axe responsible lending laws can take 20 or 30 days to process a mortgage.

“So, the fundamental issue is lenders’ ability to process mortgages. And for many of the big banks, they have been too risk-averse in the interpretation of the principles-based law.”

According to the Momentum Intelligence Broker Pulse survey for May, all four major banks have continued to experience delays in their time to initial credit decision, with the average lender turnaround figure ballooning to 11.5 days for broker loans.

While none of the major banks were able to get back to brokers in under 10 business days in April, non-major banks like Macquarie and ING were found to be the fastest at 3.9 and 4.2 days, respectively.

The CEOs of the CBA, NAB, Westpac and ANZ recently told the House of Representatives’ standing committee on economics that turnaround times were within one or two days in the proprietary channel but, on average, between 10 and 12 days in the broker channel.

[Related: Automating broker loan assessments ‘on the priority list’: ANZ]

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Comments (9)

  • It's the name - if you say you are going to remove Responsible Lending, it sounds bad! What they need to do is clear the RL laws, particularly around scrutiny of LE
    1
  • Maybe parliamentarians should be licenced before being elected and have Responsible Legislation Obligations that need to complete before speaking their ignorant views.
    0
  • Lambie thinks she's served it to the big end of town but what she did was shaft all the mortgage prisoners who will be paying as a result of her inability to understand how the system she's protecting works!
    0
  • I love the way so many people with zero knowledge of the industry have there very strong opinions aired in the media.
    The reality is, the law isn't actually the problem. Its the way ASIC chose to interrupt it.
    What I don't understand is how ASIC has any say at all considering it lost in court three times in a row with its interruption.
    2
  • Most brokers and almost all lenders are dreamers. How about the branch expert that submitted a loan without spouse and dependants on the application form so that the husband can get the loan in his own name and buy the property by himself? Geat responsible lending Mr and Mrs Major bank!
    0
  • The difference between the turnarond times for ING and Macquarie, vis the big banks, is how they interpret responsible lending. ING and Macquarie don't require bank statements and they take a reasonable approach to living expenses. The rest don't. Over redulation from responsible lending is exactly why service levels are a mess.

    What Ms Lambie doesn't appreciate is that it's not the top end of town that is being held in check by responsible lending. It's the single Mums who will likely never own another home after their divorce. It's the aussie battler who's trying to get ahead to provide for themselves and their families. It's the milddle income borrower who can't refinance out of an expensive loan despite never missing a repayment.
    4
    • RLO have never prevented me from getting a deal approved. And I have never had an application delayed by the big 4 due to living expenses. Sometimes I wonder what planet some of my fellow brokers are on...?
      0
      • That would be the planet where the assessor questions the amount of several itemised expenses because they don’t think it’s suitable/enough. You could show evidence but in the end they want an explanation and if they accept it, they use the higher HEMS figure anyway?

        You must have very capable customers with little issues in their expenses?

        Not all deals are as simple as yours.
        0
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Malavika Santhebennur

AUTHOR

Malavika Santhebennur is a content specialist at Momentum Media, focusing on mortgages and finance writing.

Before joining Momentum Media in 2019, Malavika held roles with Money Management and Benchmark Media, where she was writing about financial services.

 
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