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Australia scraps responsible lending laws

The Australian government has axed responsible lending laws in "the most significant reforms to Australia's credit framework in a decade".

Friday, September 25th 2020, 11:13AM 1 Comment

Josh Frydenberg

Australian treasurer Frydenberg has watered down rules for the nation's banks, making lenders subject to less onerous oversight.

The Aussie government is keen to boost lending after Australia's first recession for nearly 30 years. 

According to the Australian Financial Review, a slashing of red tape will remove the Australian Securities and Investments Commission (ASIC) from enforcing responsible lending laws.

ASIC will be given greater oversight of payday lenders and vulnerable borrowers instead.

Banks and non-banks will be policed by prudential lending standards overseen by APRA, eliminating the old ASIC lending rules.

Frydenberg called the changes "the most significant reforms to Australia's credit framework in a decade".

He confirmed the decision on Friday, ending former PM Kevin Rudd's strict laws which were introduced in the aftermath of the GFC.

The treasurer said:  “We’re streamlining the provision of credit, quicker to access credit, while keeping the consumer protections in place.

“This is going to make it much better for consumers, whether they are getting their first home loan, or increasing their mortgage, or extending their overdraft, or receiving a credit card, this is about personal consumer loan activity and making it easier.”

Frydenberg also said the changes would boost small businesses.

“Our changes will make it very clear that the prudential framework that’s in place is not to apply to small business lending. We want small business to access lending,” he said.

The rule changes are likely to have a significant effect on New Zealand's banks, with the "big four", ANZ, BNZ, ASB and Westpac, Australian-owned. 

NZ advisers have blamed Australian responsible lending laws for an overly-strict approach from the banks in recent years, with servicing criteria making it difficult for borrowers.

The responsible lending rules have been criticised in Australia for squeezing the flow of credit.

Bank stocks reacted well to the news. In early trading, Westpac shares jumped by 6% in Australia. 

Tags: APRA ASIC Responsible lending

« NZFSG merges with KepaAdvisers hopeful about Aussie lending changes »

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Comments from our readers

On 28 September 2020 at 2:35 pm Andy the adviser said:
At long last, the legislators are finally listening to us.

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.69 2.79
ANZ 4.44 ▼3.09 3.25 3.39
ANZ Special - ▼2.49 2.69 2.79
ASB Bank 4.45 2.55 2.69 2.79
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.55 2.69 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.15 3.29 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online 2.95 1.99 2.35 2.45
Heretaunga Building Society 4.99 3.50 3.40 -
HSBC Premier 4.49 2.45 2.60 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 2.45 2.65 2.79
Kainga Ora 4.43 2.93 3.07 3.24
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.30 3.54 3.54
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.79 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
Lender Flt 1yr 2yr 3yr
SBS Bank 4.54 3.05 2.99 2.99
SBS Bank Special - 2.55 2.49 2.49
The Co-operative Bank - First Home Special - - - -
The Co-operative Bank - Owner Occ 4.40 ▼2.49 2.69 2.79
The Co-operative Bank - Standard 4.40 ▼2.99 3.19 3.29
TSB Bank 5.34 3.29 3.45 3.59
TSB Special 4.54 2.49 2.65 2.79
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 ▼3.09 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.49 2.69 2.79
Median 4.55 2.94 2.99 2.80

Last updated: 29 October 2020 5:00am

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