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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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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.14 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.74 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.89 6.55 6.35
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.74 ▼7.09 ▲6.95
SBS Bank Special - 7.14 ▼6.49 ▲6.35
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.84 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.24 6.75 6.39
Median 8.64 7.19 7.17 6.65

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