It’s early days yet on the draft legislation governing commercial loans – but broker responses are already varied.
Yesterday, Australian Broker reported that the proposed law changes which could end up restricting access to business credit and potentially require them to ask borrowers some awkward questions.
In its current form, the legislation would require brokers to ask clients whether they’re ‘prepared to lose their home’ when signing on for a commercial loan – something which Gadens lawyer’s Jon Denovan describes as a ‘strange’ and subjective question.
Ranjit Thambyrajah, of Acuity Funding, says he’s concerned that the law change could backfire on brokers dealing with ‘unscrupulous borrowers’.
“Every time a customer comes to me for assistance, I do everything I can to keep them from having to lose their home. If, down the track, they do – it’s part and parcel of the business. I don’t think [asking borrowers whether they’re willing to lose their home] is a logical approach because a business client will risk anything if they want to, but if the time comes that they have to sell their home they will try and save it. They could say ‘the broker didn’t explain this to me’.”
However, Healthy Lending’s Scott Woodhouse says it’s not so much legal repercussions that he’s concerned about – he just can’t see how borrowers will agree to the query in the first place.
“I’m all for regulation, it weeds out the guys who don’t know what they’re doing. But I’m a bit miffed that they’re thinking about asking people whether they’re prepared to lose their home – everyone’s just going to say no.”
Another controversial angle surrounds the potential requirement for commercial brokers to obtain a permit in addition to their ACL.
Thambyraja says doing so is aiming too closely in the direction of a nanny state, where borrowers aren’t expected to use common sense.
“I think there’s got to be a point where a person needs to be able to think for themselves and not rely on government protection. Legislation that protects consumers, I’m all for. Legislation for those who want to take the risk for return, I’m against.”
But Woodhouse says he’d be happy to obtain a permit, adding that it could help savvy brokers more visible.
“I think a lot of people will think the permit is over-the-top, but I think anything that makes good brokers stand out from the run-of-the-mill brokers is a good thing. I think what the government is proposing is a bit over-the-top, but as long as there’s a bit of sense in there then I’m fine for it.”
Mark Churchill from Churchill Financial Services says he isn’t particularly bothered either way when it comes to potential permit requirements – he just doesn’t really see the point.
“I think the commercial side of the industry is pretty unregulated – it’s up to the banks to regulate brokers. There’s not a massive amount of brokers out there who do the big side of the business so I think we’re pretty much self-regulated. We’re probably more regulated by the banks than by any legislation.”