RLC in the Media: Looser lending laws may lead to worse financial abuse, campaigners warn

Financial rights and domestic violence campaigners warn the government's bid to loosen lines of credit as the nation recovers from recession will end up making financial abuse more frequent and severe.

Katina Curtis reports for Sydney Morning Herald.

The government is consulting on planned changes to banking rules, including rolling back responsible lending obligations established in 2009. These mandate banks check the requirements, objectives and financial situation of each borrower applying for a loan.

A Treasury fact sheet about the changes says the "prescriptive obligations" have resulted in obtaining credit becoming more burdensome for borrowers "without necessarily improving a lender's ability to understand if the loan is suitable".

But lawyers who represent victims of financial abuse by a partner say the responsible lending obligations provide vital protections that give them the ability to argue for debt waivers so victims can move on with their lives.

Laura Bianchi, the head of the Redfern Legal Centre's financial Abuse Service NSW, said the responsible lending obligations were fundamental in these kinds of cases.

"If the responsible lending laws are repealed we expect to see an increase not only in the frequency but also the severity of economic abuse and also reduced legal options to help people," she said.

"When the responsible lending laws came in, one of the key factors was that you couldn't do the 'hear no evil, see no evil', you had to actually ask the right questions ... to determine whether this is a suitable loan," said Financial Rights Legal Centre chief executive Karen Cox.

Australian Banking Association chief executive Anna Bligh says the planned changes will simplify the system while keeping protections.

But Ms Cox didn't believe that was sufficient, saying the responsible lending obligations gave a legal provision that could be used to help victims.

"There's nothing in these replacement standards that really directly go to that," she said. "Even if I can afford a loan, if it's not suitable for my purposes or my circumstances then it can still be a disaster."

Ms Cox and Ms Bianchi are both signatories to a letter the Economic Abuse Reference Group sent to Minister for Women Marise Payne expressing "grave concerns" over the rollback. They are yet to receive a response. Treasurer Josh Frydenberg did not respond when asked whether he was aware of the concerns.

Opposition spokeswoman on prevention of family violence Jenny McAllister said the government needed to explain how the changes were consistent with its own policy that it was everyone's responsibility to act on domestic abuse.

Read the full story here (Syndey Morning Herald, 16 November 2020)

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