Industry players are weighing in on the federal government’s Green Paper. In a statement released yesterday, the MFAA called for one system of credit regulation, rather than dividing responsibility for lending and personal finance between the states and the commonwealth.
“The commonwealth has an opportunity to simplify and improve the law, reduce business costs and provide better protection for consumers. This opportunity should not be missed, but can only be achieved by well considered commonwealth legislation covering all consumer broking and lending,” said Phil Naylor, CEO of the MFAA.
“The MFAA believes that the only viable option is for the federal government to take control of the regulation for all credit facilities, including personal loans, mortgages and credit cards.”
The MFAA’s calls for a unified approach to regulations were backed by professional services firm Deloitte.
“If you split the regulations between mortgages and non-mortgage loans some players will face compliance obligations across a possible nine different jurisdictions. This would of course lead to increased costs,” said Phil Hardy, Deloitte banking and finance specialist.
The Green Paper’s reasoning for excluding non-mortgage loans rests primarily on coverage. Mortgages cover 86% of all lending. It also points out the “varied needs of consumers” across jurisdictions as well as individual product characteristics.
“We note that Senator Sherry is on public record as advocating all credit come under a national banner and we support that. Our concern is that lower value consumer credit can and does cause problems and over extend consumers, even if issued in relatively small amounts.”
Lower value credit can also lead to bad credit history and impact consumer’s ability to obtain a mortgage, Hardy added.
“A case in point is the recent noise around pay day loans and their potential for predatory lending. There is minimal appropriate consumer protection for such credit other than general consumer affairs protections that are different in each state,” he said.