The FBAA is currently in talks with government officials over the extension of NCCP into small business lending, according to the spokesgroup’s president Peter White - and he’s warning brokers to keep the legislation ‘on their radar’.
The legislation was recently deferred until after the upcoming elections, but White expects it will not be put on the backburner for long.
“It’s fairly high on the agenda. The concerns of myself and many others is that it could have some serious impact.”
As it stands, the legislation - while largely unnecessary, according to White - should create minimal issues for brokers, but he is concerned that some parties may ‘decide to go snipping a different trail’.
“There’s nothing wrong with the current rigour, as far as credit is concerned. My single greatest concern is - and we saw it happen through the GFC - that because something comes under a new piece of legislation, that access to credit becomes restricted.
“And of course we don’t want to see somebody getting a little bit creative on their own time and trying to bring other things under NCCP as well, which would be highly inappropriate, because the risk dynamics when you are assessing credit for business lending is vastly different to home loans.”
White was a broker during the GFC, specialising in commercial lending, and says there is a real danger that history will repeat itself to an extent and that interested parties will be opportunistic with the extension of NCCP.
“I tried to rescue a few [small businesses during the GFC] and I just couldn’t because the banks moved so swiftly and changed the rules so dramatically, you actually couldn’t help them – which was really soul-destroying.
“That’s what’s in the back of my mind and I’d really hate to see that sort of thing happen again, and I now have a slightly different position where I can influence some thinking earlier on before that happens.”
A restriction on credit would stymie small business expansion, increase redundancies and loan defaults and ultimately ravage the economy, says White.
“It just creates a minefield of problems out the back-end. We need to be supporting small business, not making life harder.”
White is in talks with government officials Bernie Rippoll, Andrew Robb and Mathias Gordon and has been asked to submit a paper emphasising his viewpoint that care needs to be taken the legislation is not taken any further than is currently proposed.
If the regulations go ahead as they stand, brokers will be hit with extra paperwork, and they will need to ensure they fully understand aspects of commercial lending, such as reading balance sheets and profit and loss statements, says White, which is where a course such as the Diploma in Financial Services may benefit certain brokers.
“Brokers need to be aware that this is something that will come downstream, and when it does it’s going to have an impact. It just means that something you might have classified in your minds as ‘unregulated’ is now captured under NCCP, and you need to treat it as such.”