On Friday (20 November), the federal government’s consultation on changes to responsible lending obligations (RLOs) closed.
While the final decision around the consumer credit reforms is yet to be determined, several industry commentators have already made known their thoughts on the impact of the removal of RLOs for everything except small amount credit contracts and consumer loans.
The changes came after Treasurer Josh Frydenberg said that the principles-based responsible lending framework had become “an overly prescriptive set of obligations” which had stifled the flow of credit.
Reaction to the move has been mixed. While many have supported the reason behind the change, others have highlighted that lenders will need to make drastic changes to the way they view borrowers and understand their financial position on an individual basis.
The CEO of the Financial Rights Legal Centre, Karen Cox, outlined that the current lending obligations prescribes “important steps which often identify red flags in domestic and family abuse”.
Likewise, Laura Bianchi, team leader of Redfern Legal Centre’s Financial Abuse Service NSW and coordinator of the Economic Abuse Reference Group NSW, said its members had “grave concerns” about the impact of removing lending protections on people experiencing domestic and family violence.
“The wind back of responsible lending obligations will have dire consequences for people experiencing financial abuse. Coerced debt is a common factor preventing victim survivors from leaving a violent relationship and re-establishing their lives,” Ms Bianchi said.
“It has been well documented that rates of family violence and economic abuse have risen sharply during the COVID-19 pandemic.
“Removing these critical protections at a time when so many women are more vulnerable than ever to economic abuse could have devastating results.”
The measures will commence on 1 March 2021, subject to the passing of legislation.
Read the full article here (Mortgage Business, 23 November 2020)
