'Going easy on the banks': Labor, Greens warn against looser lending laws   
Brisbane Times
September 25, 2020

Plans to ease lending rules for banks could face a fight to get through the Senate, with Labor and the Greens warning against rolling back consumer protections.

Treasurer Josh Frydenberg announced on Friday plans to simplify lending rules to allow the easier flow of credit and mortgages into the economy in a bid to recover from the COVID-19 recession.

Shadow treasurer Jim Chalmers said Labor was deeply concerned the changes signalled an intention to dump the recommendations of the banking royal commission.


"What started a decade ago as a principles-based framework to regulate the provision of consumer credit has now evolved into a regime that is overly prescriptive, complex and unnecessarily onerous on consumers," he said.

The changes will see responsible lending obligations removed from the National Consumer Credit Protection Act, and allow lenders to rely on the information provided by borrowers, replacing the current practice of "lender beware" with a "borrower responsibility" principle.



But shadow treasurer Jim Chalmers said Labor was deeply concerned the changes signalled an intention to dump the recommendations of the banking royal commission.


"We want to see households and businesses get sufficient access to finance but we don't want consumers caught in debt traps or the balance tipped back in favour of shonky lenders," Dr Chalmers said. "The government has form when it comes to going easy on the banks and loan sharks."

Labor said Commissioner Kenneth Hayne's first recommendation in the final banking royal commission report said the government should not amend the National Consumer Credit Protection Act's obligation to assess unsuitability.

Dr Chalmers said Labor would examine the proposed legislation closely before deciding whether to support it.

Greens senator Nick McKim said the Greens would look for support in the Senate to stop the changes getting through.

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Treasurer Josh Frydenberg is announcing rules to make it easier for banks to lend for mortgages.

"The day after Westpac received the largest corporate penalty in Australian history, the government is changing the rules to benefit the banks," he said. "Looser lending standards will result in higher profits, higher dividends, and more money flowing into the most overpriced housing in the world.

"This is not the pathway to recovery."   

Master Builders Australia chief executive Denita Wawn said the changes would give banks more flexibility to approve housing loans.

"The Reserve Bank has already flagged that the tighter regulatory provisions have been holding back credit growth and some banks have acknowledged that they have been forced into being overly conservative," she said.

wasn't the main cause of the GFC loose lending rules? ... now the libs want that made into law here .... geniuses

John Smith wrote on Sep 26^th, 2020 at 7:43am:


It wasn't that long ago (either just before or during the Fin. Services RC?) that APRA tightened a number of lending standards.

I think the thing that might get a bit "lost" during this debate, is the whole bit about "open banking".

Sure, it was designed to allow better account portability etc. But it was also supposed to allow financial institutions a more "holistic" view of a borrowers actual spending habits, in order to ensure that for any loan they took out, they could comfortably meet the repayments.

So, one question is, "if they now don't need/won't use the larger amount of personal info. they have available to them under "open banking" (because of looser lending standards), then what will they use it for?"

All of that leaves aside the inevitable question around just how our "economy" is run.

It's a worry that the only solution they have in mind to "grow the economy" is to make some of the most indebted people on the planet...even more heavily indebted.

As Ye_Grappler points out, there will be people who'll come out of this badly, and others who'll be waiting to take advantage.

Another mass transfer of wealth from the many to the few in the offing?

The Libs are trying to pretend that the malfeasance uncovered by the Banking Royal Commission didn't happen.

I am happy to put the onus for repaying a home loan more squarely back on the shoulders of the borrower, rather than having a bank scrutinise every financial aspect of my life to determine my capacity to repay.     The tightening of the lending rules has meant many people have struggled to even get an appointment with a loans office because, on paper, they can't afford to repay a mortgage under the government rules.     Most people will adjust their financials to put paying off their home loan each mont at the top of the list.    Having said that, there do need to be sensible markers for lenders to judge whether they should lend or not, and a good risk analysis should show that.   

My issue is with payday lenders and the "Cash Train" type lenders who appear to have a virtual free rein on lending to people who may not have the capacity to repay against a sometimes exorbitant interest rate.   I think people are in far more danger of defaulting on these types of loan, rather than a home loan