NCCP for small business divides pundits

by BN01 Nov 2012

The mortgage broking community is divided over calls for the expansion of the National Credit Code to protect small business.

Ken Sayer of Mortgage House told Australian Broker TV the NCCP should be extended as mum and dad businesses are being increasingly caught out by bank-led property re-evaluations.

“Even if their business is going to plan, they can’t find $500k or even $1m in a short term with little notice, so what I’m trying to say is they should be made aware. And if they are not made aware, they should be allowed some flex given that set of circumstances,” he says.

“We would hope that properties would appreciate in value. What most people don’t bank on is a depreciating value, and the consequences thereof.”

However, Ranjit Thambyrajah of Acuity Funding says the proposed regulatory changes would hinder business, and create more red tape for brokers.

“The NCCP is good for what it’s there for, which is to look after consumers, to look after people who aren’t fully aware of lending and lending policies and what that could mean for them and their future borrowings,” he says.

“Small businesses, or small to medium-sized businesses are very different. They’re more sophisticated, they know what they’re doing. In fact, quite often they actually don’t want any intervention by government, they want to be allowed to make their own minds up and do what they want, and are prepared to wear the risks of that.

“It’s a risk on return relationship, and they do not want to be hampered.”

Thambyrajah argues banks are already contacting their business-owner clients ahead of any problems.

“In every instance, it’s not the first phone call from the bank manager that clients are complaining about.

“The banks have been very good with their client base, they’ve given them plenty of notice, usually they have a relationship with the client, and they’ve actually explained why the problem is there. They’ve given them plenty of time to fix it up,” he says.

Sayer, however, remains adamant the potentially devastating nature of a re-evaluation is what’s at stake.

“These guys are losing half their working life in a single blow, so I have a problem with that, and we should work much closer to small and medium-sized businesses,” he argues.

“It’s the same as every enhancement: we all resist up front, but it actually turns out better for the industry in the long-run.”

But what about the cost to brokers, in terms of extra training and awareness of new NCCP policies? Thambyrajah is sceptical.

“For a broker to be properly equipped to work in an environment where NCCP covers some commercial-type transactions, it will take a lot more training, and also a lot more experience, so that will make it very difficult,” he warns.

Watch the video interview on Australian Broker TV


Related stories:

Stretch credit code to cover small business



  • by David 1/11/2012 10:31:19 AM

    When will NCCP provisions, including Responsible Lending and full disclosure be applied to equipment finance which for far too long been on easy street with little or no compliance and the opportunity to charge whatever fees they desire without the client having any knowledge. Why is it that these financiers may levy 4s or 5s when a mortgage broker must struggle for 0.5% less aand be accountable for the next thirty years when these brokers can walk away and simply move onto the next fruitful transaction?

  • by ozboy 1/11/2012 10:31:58 AM

    So Mr Sayer's whole argument is based on one thing, re-evaluations and for that he wants this cumbersome legislation to be enacted. Who said we are becoming a nanny state?

  • by Aaron Greffenius 1/11/2012 10:39:58 AM

    Brokers can put clients with commercial lenders who don't annually review, specifically to avoid this. Everyone hates the idea that banks can foreclose on debt taht has been conducted perfectly. We all hate this. What I would hate more is more regulations out there making this impossible.
    Why shouldn't customers be able to choose a loan even if there are annual reviews attached to it? These calls for new regulations only close down options for clients. A whole stack of new ones don't spring up as a result. Just the old options dissappear.
    Regulations always are well meaning and almost always are disasterous. Take the recent new paperwork needed. What is the point of duplicating all the information that is in an application. Are the clients somehow more aware if they see it twice? that is all the NCCP ever did. new paperwork that says exactly what the old paperwork said. Oh yeah, it also made lots of flexible options illegal, so now self employed small businesses have far less choice. do we really want to compound that now?