Labor grabs opportunity to tell regulators they should "back out" of changes
The government’s plan to bin the responsible lending law for banks is facing a roadblock in the Senate after banking royal commission victims asked Treasurer Josh Frydenberg to retain the credit rules.
Labor has seized on four letters sent by witnesses at the banking royal commission, according to a report by The Australian Financial Review. The letters, organized by the Consumer Action Law Centre, urged Frydenberg to keep the rules in place. Labor’s financial services spokesman, Stephen Jones, said the treasurer should listen to consumers who had “laid bare” their stories to the royal commission.
“The government should back out and reach out to Labor on a sensible agenda,” Jones said. “If there are serious issues about the flow of credit, we’re willing to look at it – but rolling back consumer protection is a no-go zone.”
Frydenberg announced in September that responsible lending laws introduced by Labor in the wake of the Global Financial Crisis would be scrapped for banks in order to boost the economic recovery from the COVID-19 pandemic, AFR reported. The government intended to shift from “lender beware” to the more traditional “borrower beware.”
Should the responsible lending law be scrapped, banks and some non-bank lenders will be regulated under less prescriptive prudential lending standards currently overseen by the Australian Prudential Regulation Authority, and the stricter Australian Securities and Investments Commission responsible lending rules will be eliminated, AFR reported. ASIC’s oversight of payday lenders will be increased.
However, the government faces a challenge passing the legislation through the Senate, as it is opposed by Labor and the Greens. The government will need support from three of the five other crossbench senators, according to AFR.
Centre Alliance senator Sterling Griff said he would consider whether “additional safeguards” were needed.
“But on the surface we understand the need for changes to free up the availability of finance for less risky lending,” he said.
Independent senator Rex Patrick said that while he would consider the legislation, he was not convinced the responsible lending law needed to be repealed. One Nation’s two senators and Tasmanian independent Jacqui Lambie have not settled on a final public position, AFR reported.
