Regulation will restrict credit: MFAA
By
Ben Abbott
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17/08/2010 6:00:00 AM
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1
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There is no evidence any further legislative reform is required to regulate credit for small businesses, and any regulation is likely to hurt the sector by restricting available funds, the MFAA has said.
In its response to the government's second phase of National Credit Reform, the MFAA has argued in a submission to Treasury that there is no evidence of poor lending practices at the margin in the small business sector, as was the case in the residential sector.
“Unlike residential mortgages, lending to small businesses requires greater scrutiny by lenders and brokers,” MFAA chief executive Phil Naylor said. “We are concerned regulation would restrict the availability of credit to small businesses which will be of significant detriment,” he added.
The position supports that of a group of WA brokers headed by Finance Solutions' Ray Weir, which also argued in a submission to Treasury that regulation would impinge the ability of small busines to access credit.
The MFAA's submission states that the industry has already undergone major changes as part of the first phase of NCR, and that "the combination of these reforms will have a significant affect on the credit market, even in respect of credit which is not regulated by the NCCP Act".
The industry body said time should be given to see how these already legislated initiatives work in practice, and that sufficient regulatory tools are now available to protect consumers and small business and drive out predatory lenders.
The submission goes on to say that regulation is a "two-edged sword" that could impact borrowers and reduce commercial flexibility and innovation, and that there was no evidence borrowers were seeking greater protection.
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No rationale for SME credit regulation
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Maria Rigoni on
17 Aug 2010 10:57 PM
So the MFAA is in favour of protecting a natural person who borrows for personal domestic or household purposes, residential property investment purchase, refinance, alteration or renovation of; but they DO NOT favour protection for the natural person who borrows for business or other investment as they consider that these natural persons are not worthy of such protection.
Question one - are their members offering a higher standard than required by law for "ALL" consumers of credit products? I suggest that this stance would confirm not!
Why are the MFAA not supporting protection by the law of all natural person borrowers - in my experience Finance Brokers place the interests of ther client "the borrower" before the interest of a credit provider who is in business to make as much profit for themselves as possible regardless of who or how many people they crush in the process.
I suggest that the MFAA response has been developed in the best interest of credit providers and certainly not Finance Brokers (their major membership base). It is the Finance Broker and not the credit provider who demonstrate that they have the best interest of "consumers of all credit" at heart.
If you have a basic knowledge of finance and the free market you understand that small business lending is not restricted by "consumer laws" rather in short it is restricted by lack of real competition in the market place, capital adequacy requirements and greed created via bank executive remuneration contracts.