The Government has this morning announced major reforms to the National Consumer Credit regime including the scrapping of Responsible Lending Obligations (RLOs). Below is short summary of the key proposals from the Treasurer's media release and fact sheet:
- RLOs to be scrapped as "no longer fit for purpose" except for pay-day loans and consumer leases – ASIC's RG 209 gets special mention as a contributor to the prescriptive obligations
- APRA prudential standards on loan origination to continue to apply to ADIs
- Appropriately adopted prudential standards to apply to non-ADI lenders – ASIC to administer
- Mortgage brokers will no longer be subject to RLOs but will need to comply with best interest duty obligation which commences on 1 January 2020
- Predominant purpose test in National Credit Code will also appear to change – "where a proportion of an application for credit is for a business purpose, irrespective of the proportion, the new framework will not apply".
- New cap on total payments that can be made under a consumer lease
- New 'protected earnings amounts' for SACCs and consumer leases
- Debt management firms helping consumers with internal and external disputes to require an ACL from 1 April 2020
The 1 March 2021 start date for the RLO reforms appears ambitious. Reforms to debt management firms to start from 1 April 2021.
There's lots to digest about these reforms and their implications. Obviously, the devil will be in the detail of the legislation. Look out for draft legislation and regulations to come out soon.
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