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
Stretch credit code to cover small business