Both broker industry associations have welcomed the government’s proposal to relax responsible lending obligations in a bid to allow credit to move about more freely.
Immediately following the announcement last week, the Finance Brokers Association of Australia (FBAA) was already calling for bipartisan support for the proposed changes to lending regulations.
According to FBAA managing director Peter White AM, a system that puts the accountability back on the borrower is “common sense”.
“It’s become an exercise by lenders to pass judgment on a borrower’s discretionary spending, which isn’t the role of a lender,” he said.
“All a lender should care about is the capacity of the borrower to service the loan and they already have many criteria on which to base that. This won’t change.”
White emphasised that banks will still be doing their due diligence and checking people’s information but, according to the MD, if a borrower is being deceptive it should be them who is accountable to pay the price.
The association head said the outcry from consumer groups is unwarranted as the updated regulation will simply remove restrictive red tape for people who truly can afford to service a loan.
Upon welcoming the proposed reforms to the Australian credit framework, MFAA CEO Mike Felton also reminded the industry – and beyond – of how the news has heightened the importance of the incoming regulation for mortgage brokers.
He explained that borrowers can have peace in knowing their mortgage broker is operating under a Best Interests Duty from 1 January 2021, which is a “higher duty than responsible lending”.
“This will further differentiate the mortgage broker channel,” he added.
However, Felton expressed slight wariness in calling banks to ensure broker customers are provided with the same application processing and credit assessment service levels provided to branch customers in order to ensure consumer outcomes and competition are not impacted if the new regulation goes forward.
Like White, Felton noted that turnaround times, which have lagged to new lengths over recent months, would likely benefit from the reform.
“The changes should assist to address what has, in many cases, been an almost forensic audit of consumer expenditure when assessing credit in recent times, with little to no consideration given to the borrower’s ability to adjust spending habits in order to take on new exposures,” he explained.
"These reforms will remove unnecessary barriers to the flow of credit to consumers and small business which will assist the post COVID economic recovery."