MFAA makes six recommendations in its submission
Achieving the right balance between ensuring small businesses can access credit and maintaining an effective complaints framework is crucial for the overall economy, MFAA said in a recent submission to AFCA’s draft Approach to Appropriate Lending to Small Business.
MFAA’s submission included six recommendations to AFCA, as it emphasised the need for an approach that aligns with policy objectives and acknowledges that commercial lending differs from responsible lending requirements for consumer credit products, such as residential mortgages.
“Small businesses should have access to credit, and they should also have an avenue for external dispute resolution,” MFAA CEO Anja Pannek said. “However, considering the fact commercial lending takes a variety of forms, it is important that there isn’t a ‘one size fits all’ approach.”
One of the six recommendations in the submission was that the approach should address the circumstances under which a broker might be involved in a complaint and highlight the significance of voluntary membership in AFCA.
“The association leads from the front around self-regulation and as such, as part of our rules, we require all our broker and lender members to hold membership of AFCA,” Pannek said. “In saying this, it is also important to recognise that not all small business lenders are AFCA members.
“Therefore, in a situation where a broker is an AFCA member, but the lender is not, it is not appropriate for the complaint to proceed simply because the only avenue for AFCA to facilitate the complaint is against the broker.”
MFAA’s other recommendations included the consideration of the broader economic environment during lending and the stipulation that no compensation should be granted when a complainant is found to have withheld information from the loan assessment.
“We consider that to award compensation in circumstances like this could unintentionally incentivise dishonest behaviour,” Pannek said.
She said MFAA members, many of whom are also small business owners, assist other small businesses in accessing credit to foster growth and success.
“Finance brokers are already heavily involved in commercial lending with Productivity Commission research indicating that at least 40% of commercial loans are written by brokers,” Pannek said.
“In addition, our Industry Intelligence Service report for the six-month period ending 30 September 2022 shows that three in ten mortgage brokers are also writing commercial loans, with more diversifying each year. We also represent broker members who operate solely in the commercial lending sector.
“This is why it was important for us to represent the industry on this issue, in particular highlighting the differences between residential mortgages and commercial loans.”
MFAA’s Equipment and Commercial Finance (E&CF) Forum played a crucial role in shaping the submission, adding valuable expertise and insights to the discussion, Pannek said.
The E&CF Forum, comprising broker, lender, and aggregator members, offers insights and guidance to the MFAA on various pertinent matters that impact the commercial lending sector.
The submission is available on the MFAA website.
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