The responsible lending obligations reforms that are to be discussed in the Senate this week should be encouraged, so long as they avoid the commercial sector, according to the peak industry body for commercial brokers.
The Commercial & Asset Finance Brokers Association of Australia (CAFBA) has given Australian Broker access to its legal opinion on the proposed changes to the lender/borrower relationship, which could be fundamentally altered if the reforms, which were recommended by the Senate Economics Legislation Committee, were to be passed.
One of the key aspects of the legislation that had spooked the commercial broking industry had been the potential for the Best Interest Duty (BID) that came into effect for mortgage brokers on 1 January 2021 to be extended to other areas of broking.
If passed, the new bill will see BID taken further, as all consumer brokers will be subject to it. It will, however, only apply to consumer transactions and not to commercial transactions.
Australian Broker spoke to commercial brokers who also service consumer clients. They feared they would be subject to different rules when dealing with different clients, creating the potential for confusion. However, the new bill delineates clearly between the two sectors of the industry.
Many brokers pointed out that they already adhered to rules that were similar to BID as part of best practice within the industry, but that they did not wish to have extra paperwork imposed upon them that would add to their workload unnecessarily.
“Whilst some CAFBA members hold an Australian Credit Licence and provide services related to consumer lending, their prime source of business is derived from business finance,” said CAFBA’s submission. “CAFBA is focused on commercial broking so our key focus is to ensure any amendments to the NCCP Act do not impact on business finance broking.”
“It is therefore our view that there is nothing in the proposed changes that should affect commercial brokers, and the explanatory notes are clear that it only affects regulated consumer transactions. Further, if a broker with a credit licence introduces a commercial deal this also is not affected.”
“In essence the legislation replaces responsible lending with Best Interests Duty, which is extended to all consumer transactions, and CAFBA sees this as a positive step for best customer outcomes.”
The law will be debated and potentially voted upon this week. It is backed by the Coalition and opposed by Labor and the Greens, which means that it will likely require the support of crossbench Senators to pass.