The Australian Finance Minister, Josh Frydenberg announced today that the Federal Government plans to roll back the Responsible Lending Regulations enacted by the Rudd government in 2009. If approved, this change would remove existing ‘responsible lending’ laws, placing responsibility back on the borrower as opposed to the banks. This change will make it easier to obtain loans whilst boosting the economy.
Under previous obligations, banks and lending institutions were held accountable for issuing loans ‘unsuitable’ for the applicant. The Act placed the responsibility of issuing loans on the banks, as opposed to the applicant seeking a loan they can afford. By taking responsibility for an applicant’s ability to borrow, banks and lending institutions required additional documentation and materials to determine an applicant’s eligibility, resulting in longer process times and overall difficulty securing a home or small business loan.
Treasurer, Josh Frydenberg stated that “our current regulatory framework, with respect to lending, is not fit for purpose”. As such, the government is proposing a new bill to reduce verification procedures placed upon borrowers by the bank.
“As Australia continues to recover from the COVID-19 pandemic, it is more important than ever that there are no unnecessary barriers to the flow of credit to households and small businesses,” he said.