The government says it will continue to work with cross bench senators to get the controversial bill across the line, despite confirmation Pauline Hanson won’t support the measures.
Senator Pauline Hanson on Wednesday put it on record that she won’t back plans to scrap responsible lending laws, saying “millions of Australians should not be left vulnerable to predatory banking conduct.”
The government said the reforms, announced in 2020 during the coronavirus downturn, aimed to simplify Australia’s credit framework and make it easier for households to get a loan, ensuring “consumers and small businesses can get timely access to credit as the economy continues to recover from the COVID crisis.”
Consumer groups warned the measures would lead to a “debt disaster” as people took on loans they couldn’t afford.
With Labor opposing the changes, the government was relying on support from cross bench senators in order to pass the bill. A vote was delayed earlier this year due uncertainty over numbers.
Ms Hanson said she wouldn’t back a bill that “doesn’t provide strong consumer protection or responsible lending provisions,” and that would “drag Australia back to the horror days when the banks called almost all the shots and acted as if they were untouchable.”
In a statement on Friday, treasurer Josh Frydenberg said the government would continue to work with the cross bench on these reforms “to help secure Australia’s recovery.”
“The current regulatory framework, which was put in place more than 10 years ago, too often leads to delays in consumers receiving credit, potentially impeding their purchasing decisions,” Mr Frydenberg said.
“It’s now more important than ever that our economic recovery is not held back by unnecessary barriers to the flow of credit to households and business.”
What are responsible lending laws?
The federal government introduced responsible lending laws in 2009, following the global financial crisis.
The laws require lenders to take steps to ensure customers won’t end up in significant hardship from a loan, including checking financial statements and assessing their suitability.
Essentially, lenders can only provide a loan if it is suitable for the borrower.
Why the changes?
The government said the laws have become too restrictive due to the lengthy process of checking whether a person can service a loan.
As part of its economic recovery plan, treasurer Josh Frydenberg in September announced plans to remove “unnecessary barriers to accessing credit” so consumers could “continue to spend and businesses can invest and create jobs.”
The chief executive of the consumer action law centre, Gerard Brody said the government’s key reason for scrapping the laws is no longer justified.
“The bill was announced when the economy was tanking but the property market is now hot,” Mr Brody said.
“If the legislation is passed, there will be diminished accountability for banks and individual legal rights will be taken away.”
Teaming up with other consumer groups, Mr Brody said a petition calling for the bill to be blocked had been signed by more than 35,000 people and organisations.
The peak banking body’s chief executive, Anna Bligh said no bank has an interest in lending to customers that cannot repay, and lenders would still be regulated by the Australian Prudential Regulation Authority.
“This reform means less time and paperwork for borrowers, not less scrutiny for lenders,” said ABA chief executive, Anna Bligh during a senate committee hearing in February.
She said the Australian Financial Complaints Authority, which didn’t exist when the laws were introduced in 2009, has more powers than its predecessors.
“There are more remedies available to more customers with a complaint than existed a decade ago,” Ms Bligh said.
“The government’s reforms in this bill do not the affect the rights of customers to bring a lending complaint to AFCA.”
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