Faster loans with GFC lending restrictions to be wound back
Home loans would be faster and easier to secure under major reforms proposed to make access to credit easier. But it involves winding back rules put in place to protect consumers in the GFC.
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It will be easier and faster for Aussies to get home loans without handing over swathes of personal spending details to banks, under proposed reforms which wind back some rules put in place in the wake of the global financial crisis.
In a bid to keep Australians spending to boost the economy, Treasurer Josh Frydenberg will announce a plan to reduce barriers to people securing credit.
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It will switch the obligation on lenders like banks to verify information provided by borrowers back on to the person seeking the loan, speeding up the application process.
Mr Frydenberg said that the credit reforms, which he described as “the most significant in a decade”, would increase the flow of cash to households and businesses and reduce red tape.
“With billions of dollars extended to borrowers each month, credit underpins the Australian dream of home ownership while allowing businesses to invest, grow and create jobs,” he said.
“By simplifying the loan application process for borrowers it will reduce barriers to switching
between credit providers, encouraging consumers to seek out a better deal.”
The government will argue the pendulum swung too far under the consumer credit protection Act, brought in to place in 2009 to ensure lenders do not provide unsuitable loans.
It will point to recent comments from Reserve Bank Government Philip Lowe who last month said suggested the legislation may need to be re-looked at.
“The pendulum has probably swung a bit too far to blaming the bank if a loan goes bad, because the bank didn’t understand the customer,” Dr Lowe said in August.
Rather than having to obtain and verify large amounts of information on the borrower’s expenses, regardless of the size of the loan, under the changes the lender will be able to simplify the credit assessment for lower-risk loans and take into account more assets in considering the loan.
Lenders will still need to continue to comply with financial watchdog Australian Prudential Regulation Authority’s lending standards, while a suit a measures aimed at shielding vulnerable people from payday lenders will also be introduced.
Payday lenders and consumer leases will be banned from offering a loan to someone’s who receives half their income from Centrelink, if that person had to devote 20 per cent of their income to various small credit repayments.
There will also be a cap placed on the payments that can be made under consumer leases.
If passed through the Parliament it will take six months for the new laws to come into effect.
