fbpx

Responsible lending laws to be axed: what that means for you

You might have recently heard that ‘responsible lending laws’ are set to be scrapped early next year. Rest assured though that you’ll still be able to borrow responsibly. Let us explain how.

The planned scrapping of the responsible lending laws is the federal government’s latest key initiative to boost economic recovery from the COVID-19 recession.

Now, the federal government (and the banks) say it will simplify the regulatory landscape and free up access to credit for home buyers and small businesses.

Consumer rights advocates, on the other hand, argue it’s all about “giving a free-kick to the banks” and will put borrowers at risk.

But, here’s the good news.

Not only can we assist you in making the most of the upcoming changes, but we can help you determine your borrowing power so that you’re confident to repay any loan you take out.

Sounds like a win-win, right?

Let’s break it all down in a little more detail, and how it might affect you come 1 March 2021.

What are responsible lending laws?

Basically, they put the onus on the lender to determine whether or not a loan is suitable for the applicant, and that the borrower can repay the loan without going into substantial financial hardship.

They were introduced in the wake of the Global Financial Crisis as part of the National Consumer Credit Protection Act 2009.

If you’ve applied for a loan recently, you’ll know firsthand that the bank scrutinises your ability to repay the loan very, very closely.

Ordered take-away a little too much? Had a punt on the latest sports match? Too many streaming subscriptions like Netflix? Chances are these non-essential expenses would draw some very close scrutiny from the lender.

Once the laws are scrapped, however, lenders will be able to rely on the information provided by borrowers.

That means if a would-be borrower overlooks expenses or provides misleading information in their loan application, the lender won’t be the one facing the heat.

Instead, the responsibility is flipped back onto the borrower.

That said, lenders will still be required to comply with APRA’s lending standards, which require sound credit assessment and approval criteria. So it’s not open-slather for banks.

Why it’s changing

Put simply: the federal government is pulling out all stops to kickstart the national economy in 2021.

“What started a decade ago as a principles-based framework to regulate the provision of consumer credit has now evolved into a regime that is overly prescriptive, complex and unnecessarily onerous on consumers,” says Treasurer Josh Frydenberg.

By scrapping the laws, the federal government hopes to reduce the cost and time it will take you to access credit.

“Now more than ever, it is critical that unnecessary barriers to accessing credit are removed so that consumers can continue to spend and businesses can invest and create jobs,” adds Mr Frydenberg.

What it means for you going forward

As mentioned above, the proposed changes will reduce red tape and make it easier for the majority of Australians and small businesses to access credit.

But you’ll still want to make sure you’re not taking on debt that you can’t afford to pay back.

And that’s where we can make ourselves especially useful.

Not only will we be able to guide you through the updated process, but we’ll be able to help you work out your earnings and expenses so that you take on a loan that you’ll be able to confidently repay.

That way you’ll get the best of both worlds: responsible borrowing and easier access to credit.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Make it happen

The staff at MAKE Finance Group are experienced and dedicated to providing our clients with exceptional levels of advice and service.

As a full service finance broker, we can save you time and stress as we negotiate with Banks and Financiers on your behalf. Whether it is asset or equipment finance, business finance and advice or even a home loan, we will go to the market on your behalf and find the best possible deal available.

Let us worry about the financials, as we make it happen for you.

Why Partner with Us?

The staff at MAKE Finance Group are experienced and dedicated to providing our clients with exceptional levels of advice and service.

MAKE Finance Group holds sought after commercial lending accreditations and access to a substantial panel of lenders for both Equipment and Business Finance.

As a finance broker MAKE Finance Group saves you time and stress as we negotiate with Banks and Financiers on your behalf. This allows you to keep focused on your business while we do the finance work.

This ensures you receive the best offers with the objective of saving money and increasing profitability.

Testimonials

Here is what a couple of our clients have said about MAKE Finance Group.
Commonwealth Bank

Commonwealth Bank

Bank SA

Bank SA

Bank of Melbourne

Bank of Melbourne

Choice Lend

Choice Lend

Liberty

Liberty

NAB

NAB

St. George

St. George

ANZ

ANZ

Citibank

Citibank

Westpac

Westpac

Heritage Bank

Heritage Bank

ING

ING

Me

Me

Suncorp

Suncorp

Metro Finance

Metro Finance

Bankwest

Bankwest

AMP

AMP