Tasmanians warned over ‘predator lenders’ amid rule changes

The state’s business community has welcomed changes to money lending rules announced on Friday. But a local expert has warned the “watered down and toothless” lending rules will put Tasmanians at risk.

TASMANIANS could be exposed to predatory lending tactics and sign up for loans they can’t afford if tough credit rules put in place after the Global Financial Crisis are relaxed, consumer groups say.

The state’s business community has welcomed changes to money lending rules announced by Treasurer Josh Frydenberg on Friday.

But No Interest Loans [NILS] Tasmania chief executive John Hooper has warned the “watered down and toothless” lending rules will put Tasmanians applying for loans at risk.

He said payday lenders and rent-to-buy companies would still be able to take “huge chunks of people’s income at outrageously high equivalent interest rates”.

“This will still allow these predatory lenders to sign people up to credit contracts they can’t afford,” Mr Hooper said.

“I am stunned that in the midst of the impact of COVID-19 when people are financially stressed, and meaningful action is needed, the government is virtually taking no action.”

Consumer Action Law Centre chief Gerard Brody said it was the “kind of shortsighted thinking that led to the global financial crisis”.

He urged the government to instead pass laws to stop exploitative payday loans and high-cost leases.

Under the changes, Australians wanting to buy a house or switch their mortgage will face fewer roadblocks from banks.

It will reduce responsible lending obligations on banks by streamlining credit assessment rules and putting the onus on borrowers to provide accurate information about their circumstances.

Tasmanian Chamber of Commerce and Industry boss Michael Bailey said the changes would provide some support to business in the wake of COVID-19.

But he urged the State Government to do more to get the economy back on track.

“What will really help speed up our economic recovery is travel arrangements with other safe states, such as South Australia and easing the restrictions in place on local businesses,” he said.

Reserve Bank Governor Philip Lowe has called for eased credit rules recently, saying the “pendulum has probably swung a bit too far to blaming the bank if a loan goes bad”.

The Australian Prudential Regulation Authority’s credit risk standards will remain in place, along with other consumer protections such as mortgage brokers being required to act in the best interests of consumers, unsolicited credit increase offers being banned, and higher financial misconduct fines.