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The Australian Banking Association supports proposed reforms to consumer credit laws, but is pushing for more – including more restrictions for non-banks.
In a 10-page response to the Treasury’s proposal to simplify consumer credit laws, the ABA said the proposed reforms would “strike the right balance between maintaining strong consumer protections while providing credit into the economy at a critical time,” but said more types of credit should be subject to concessions. The ABA also said Treasury should increase the obligations of non-bank lenders.
“It is important that there is proper alignment between the new non-ADI framework and the APRA framework for ADIs, to provide certainty and consistent protection for customers and to maintain a level playing field between ADI and non-ADI credit providers,” the ABA said. “This is necessary to maintain a competitive credit industry that provides the same protections for customers regardless of credit provider and delivers a range of benefits to customers including competitive pricing, improved service and ongoing innovation in products and technology.”
The ABA said the reforms should be balanced between protecting consumers and supporting the borrowers who want loans, while ensuring “consistent standards” between banks and non-banks, according to an analysis by The Australian Financial Review.
Among the ABA’s recommendations is the elimination of the “low limit credit contract” concept, in which loans of up to $2,000 will be subject to the National Consumer Credit Protection Act as well as APRA’s credit risk standards. That’s a redundancy in regulation, according to the ABA.
“Accordingly, the concept of ‘low limit credit contract’ should be removed from the Bill so that these loans, like other consumer loans, are subject only to APRA’s framework,” the ABA said.
The ABA also pushed for more consistent regulatory standards for both banks and non-bank lenders in order to create a “level regulatory playing field”. The organization lauded the government’s “intention to simplify the existing APRA requirements” by noting “some inconsistencies between the standards imposed on ADIs and non-ADIs that may negatively impact on competition and result in adverse consumer outcomes.”
For instance, non-banks are not required to consider upwards movement in interest rates or make adjustments for seasonable or otherwise variable income for borrowers nearing retirement. The ABA also said that non-bank reverse mortgage providers also face fewer regulatory burdens than banks.
“Treasury [should] consider how these important consumer protections and level playing field measures could be applied in the non-ADI framework,” the ABA said.
The ABA represents 22 member banks, including the big four. It is led by CEO Anne Bligh and governed by a council composed of CEOs of member banks.