Gerard Brody, the chief executive of the Consumer Action Law Centre says dumping responsible lending obligations would not reduce complexity in the law and would clearly remove consumer legal rights.
Brody says incentives for banks to have high standards would be removed through the loss of civil penalties for poor lending practices.
These are quite weak standards and quite leaky, Brody says of the draft legislation, noting that the move further confused the remit of APRA and ASIC.
As a consumer advocate Im not sure that I can even make an individual complaint on behalf of a borrower, he says.
Brody says the UKs Financial Conduct Authoritys light-touch approach to enforcement prior to the global financial crisis was a core cause of the collapse of the Royal Bank of Scotland.
Gerard Brody, CEO, Consumer Action Law Centre (virtual) , Richard Harris, partner, Gilbert + Tobin, Karen Den-Toll, governance, regulation and conduct partner, Deloitte (virtual) and Anna Bligh, CEO, the Australian Banking Association. Louise Kennerley
ABA chief executive Anna Bligh says the bank lobby did not directly lobby the government to ditch the responsible lending laws, but the lobby group did make a submission to ASICs consultation on the rules – some proposals of which were included in the governments proposed reforms and some that werent.
Banks I think have been very vocal in the public arena. I don’t think banks have been in any way secretive about that, she says.
Karen Den-Toll, governance, regulation and conduct partner at Deloitte, says banks don’t deliberately go out and lend money to people who aren’t going to repay it.
However, Ms Den-Toll says lenders wouldn’t breach APRAs prudential standards if they make a mistake in a handful of issues. Consumers would be relying on a patchwork of old and new legislation for responsible lending protections such as ASICs design and distribution obligations, product intervention powers, and the Australian Financial Complaints Authority.
When you have principle based regimes, you definitely need to know what the regulator thinks, Den-Toll says of the regulators 100-page guidance of responsible lending laws, which have been criticised by some government MPs. It can also get out of hand, which is what some people think about responsible lending, Den-Toll says.
Were living in a much more fluid world than we were five years ago in terms of whats expected in financial institutions.