Financial counsellors worry more Australians will end up in crisis if responsible lending laws are wound back

Cash-strapped Australians could end up in dire straits if laws are changed to make it easier to get credit, financial experts warn.

Cash-strapped Australians could spiral into even worse dire straits if responsible lending laws are wound back, experts have warned.

And new data from the National Debt Helpline – the nation’s free financial counselling service – has also revealed that during the pandemic many of those seeking financial help were also experiencing family violence.

Thirty-eight referrals to family violence assistance were sought in the March quarter and this rose five times to 192 in the September quarter, the data showed.

Financial pressures add to the risk of family violence. Picture: iStock.

Financial Counselling Australia’s chief executive officer Fiona Guthrie said it would be a disaster if consumer credit reforms passed through parliament, as it would enable easier access to credit.

“The pandemic has put more pressure on relationships as people are at home with each other more,” Ms Guthrie said.

“Where someone is a perpetrator of family violence, this makes it easier to take advantage of the other person and put them into really difficult financial situations.

“If the laws are changed it will be easier for people to get into debt and be at greater risk.

“This is going to harm individuals and families and it’s bad for the economic recovery.”

The Federal Government has said responsible lending laws were “no longer fit for purpose” and were slowing the nation’s economic recovery.

Responsible lending requires the lender to assess the customer’s ability to afford the loan and that it meets their requirements and objectives.

Financial Counselling Australia CEO Fiona Guthrie. Picture: Supplied

Ms Guthrie said that under existing laws there were “red flags” which required lenders to be alerted to and decline credit, but if the laws were changing “they can turn a blind eye to family violence”.

“They won’t care if a person is being coerced into getting a loan which is of no benefit to that person, because they’ll still be making a profit,” she said.

Assistant treasurer Michael Sukkar said the responsible lender laws were initially rolled out because of the Global Financial Crisis, but as a result it’s been hard to get credit.
”More and more red tape and more risk aversion among lenders because of those rules, has meant a significant tightening of credit,” he said.

The Consumer Action Law Centre’s chief executive officer Gerard Brody said the potential law changes “risk the sales culture and greed that was endemic in the finance and banking sector coming back”.

Gerard Brody, CEO of the Consumer Action Law Centre.

“If people are given too much credit they are over indebted at a time of economic recovery, that’s going to prolong hardship and households,” he said.

“For people who have experienced family violence and have been signed up to loans by a partner or somebody that’s taken advantage of them, this will reduce their legal rights to do something about it.

“The laws should not be changed, there’s no problem here that needs to be fixed.”

Always consider your personal circumstances before acting on financial advice. For confidential information, counselling and support, we recommend heading to, or calling, 1800RESPECT (1800 737 732). In an emergency, call triple-0.

Rebuilding after enduring financial abuse is hard. The Commonwealth Bank has launched Next Chapter, a program offering a range of services and support to make it easier for victims and survivors of financial abuse to achieve long-term financial independence.

@sophieelsworth

Originally published as Financial counsellors worry more Australians will end up in crisis if responsible lending laws are wound back