Canstar look at what is changing in responsible lending laws.
Two Red Shoes was asked to comment and contribute to the following article - thanks to @canstar for the inclusion.
The government’s plans to reform responsible lending laws to reduce “the cost and time it takes consumers and businesses to access credit” have been met with a mixture of criticism and praise.
The proposals are part of the Federal Government’s economic recovery plan, but some industry groups are concerned they will lead to a surge in the number of consumers overborrowing.
Canstar explains what the changes could mean for people looking to get a loan and how experts have responded to the controversial plan.
What are Australia’s responsible lending laws?
The National Consumer Credit Protection Act 2009 sets out how lenders must currently act when they are assessing loan applications. Essentially, it means a lender must only give a loan if it is suitable for the borrower. Importantly, the existing rules put the responsibility on the lender to ensure the credit product is suitable.
The lender must do this by making “reasonable inquiries” about the applicant’s requirements and objectives, and taking steps to verify their financial situation.
These responsible lending rules were introduced to Australia in 2009, following the global financial crisis. Now, in the midst of the COVID-19 pandemic, with Australia officially in a recession, the government has decided it’s time to amend regulations again in a bid to reduce red tape, and get more credit moving to boost the economy.