The planned changes to 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 will help you determine your borrowing power.
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?
Following the Global Financial Crisis in 2008 the National Consumer Credit Protection Act 2009 was enacted to protect consumers.
Basically, it put the onus on the Lender to determine whether or not a loan is suitable for the applicant, and whether the borrower can repay the loan without financial hardship.
If you’ve applied for a loan recently, you’ll know firsthand that the bank scrutinises your spending and your ability to afford to repay the loan very closely.
Had a punt on the latest sports match? Too many streaming subscriptions like Netflix? Chances are these non-essential expenses would draw some close scrutiny from the lender.
Under the proposed new changes, Lenders will be able to rely on the information provided by borrowers.
That said, lenders will still be required to comply with APRA’s lending standards, which require sound credit assessment and approval criteria.
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.
“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 helpful to work out your income and expenses so that you take on a loan that is appropriate for your circumstances.
That way you’ll get the best of both worlds: responsible borrowing and easier access to credit.
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