This morning was met with most welcome news overnight with multiple articles confirming about 100 pages of regulation put in place by the Rudd Government in 2009 following the wake of the GFC will be torn up & allow the swing away from ridiculous information overload being required by banks (& in turn by us as brokers) in order to assess loan requests without fear of complaints in years to come. Its about time that borrowers take some personal responsibility for loans they requested, begged and pleaded for only to cry poor some years later when their poor financial acumen leads to their financial breakdown & blame ‘the big bad bank’ for giving the loan they so desperately sought.
Banks have becoming increasingly ‘risk-adverse’ in recent years, fearing to be held liable for the borrowers inability to complete on their loan agreements. The proposed changes should assist to address what has in the past been an almost forensic audit of consumer expenditure when assessing credit, with little to no consideration given to the borrower’s ability to adjust spending habits in order to take on new exposures or how income producing purchases will improve the business cashflow, which has no doubt unnecessarily restricted the flow of credit in recent years. Under the new obligations – pending legislature – loan assessments will be based upon borrower declaration, reducing red tape
These changes will remove unnecessary barriers to the flow of credit to consumers and small businesses, assisting in our economic recovery from the COVID-19 pandemic. The evolution of the responsible lending regime – combined with post-Royal Commission uncertainty on how to effectively comply – led to unacceptable growth in credit application processing times by 10-fold or more, and swamped customers and brokers with unnecessary paperwork and processes.
Once these changes are implemented, we should begin to see faster turnaround times for qualified borrowers which has been an increasing issue for lenders, and a point of frustration for many of our clients, particularly this year. The integrity of the channel will also be strengthened as borrowers will now be more accountable for providing accurate information to inform lending decisions, which is also long overdue.
As much as we would like this to be an immediate change – legislation, trickle down to risk & credit will take some time. My focus for the past 11+ year on business and equipment finance has all been under the thumb of the current legislation but I still remember the days of common-sense lending before borrowers blamed their misadventures were greeted with 4-hour SLA approvals.
Lets just hope its not too long to wait.