Proposed changes to consumer credit laws before the Senate must be rejected as they risk harm to individuals and familiesand hindering the economic recovery they are intended to promote.
That is the stark message in a submission today from leading consumer groups to the Senate Economics Legislation Committee’s inquiry on the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 (the Bill).
The submission, which includes case studies from victims of irresponsible lending, is from Consumer Action Law Centre (Consumer Action), Financial Rights Legal Centre (Financial Rights), Financial Counselling Australia, Consumer Credit Legal Service (WA) Inc (CCLSWA), CHOICE, Uniting Communities Consumer Credit Law Centre SA (CCLCSA), Care and Consumer Law Centre ACT (CARE ACT), Indigenous Consumer Assistance Network, Victorian Aboriginal Legal Service and Redfern Legal Centre.
If the Bill is passed, it would:
- Reduce people’s legal rights against lenders and brokers
- Reduce the incentives for lenders to comply with lending standards due to the removal of penalties
- Reduce requirements for lenders and brokers to check information on loan applications
- Dismantle the ASIC and APRA ‘twin peaks’ regulatory regime for bank lending safeguards.
Financial Rights Chief Executive Officer Karen Cox said the proposed changes would remove vital legal lifelines borrowers can call upon against lenders when they are sold unaffordable credit they could never hope to repay. It will also remove penalties for irresponsible conduct.
“If this Bill is passed, it will cause untold harm to individuals and families. Removing these protections will allow lenders to load people up with unaffordable debt at a time when many people are already struggling amidst the pressures of COVID-19.”
“The Bill flies in the face of the Financial Services Royal Commission Final Report, which recommended the responsible lending laws remain intact. Instead, the Federal Government is moving to overturn them,” Gerard Brody Chief Executive Officer, Consumer Action Law Centre said.
“Providing easy debt to spend our way out of the COVID crisis is a short-sighted ‘fix’ that will have terrible long-term consequences for many people. Even with the laws we have in place, people are still being lured into unaffordable debt, and this Bill would leave the consumer credit law framework gutted and in a state of disarray.”
Financial counsellors are at the front line in assisting people in financial stress.
"Financial counsellors simply can't believe that the Government wants to wind back the responsible lending laws", said Fiona Guthrie, CEO of Financial Counselling Australia. "If these laws are scrapped, financial counsellors will see more people drowning in debt with all that entails: greater risks of suicide, more bankruptcies, more family violence and family breakdown, more homelessness and the negative flow on effects to people's mental and physical health."
“Axing safe lending laws will hinder our economic recovery. Australia already has the second highest level of personal household debt in the world. Loading people up with even more debt will make it even more challenging for households already doing it tough” says CHOICE CEO Alan Kirkland.
“This was a bad idea when the Government announced it in September but it’s an even worse idea when you see what has happened in the housing market since then. Record low interest rates and government incentives are creating booming demand, driving up prices. Removing protections from unsafe lending will put many first homeowners at risk.”