At the end of last month, Treasurer Josh Frydenberg announced future changes to lending laws, which will make it easier for Aussies to borrow money. These changes have been created as a reaction to the economic harm caused by the COVID-19 pandemic.
The government is planning to remove the responsible lending obligation from the National Consumer Credit Protection Act (2009) for most lending situations. By removing this obligation, the need for lenders to dig deep into the financial situation of customers looking to borrow money, will lessen.
The removal of this obligation will make it easier for people to get home loans and credit cards, however it also puts a burden on borrowers to make the right choice.
According to Frydenberg, loosening the lending rules will hopefully “restore balance to the system after 10 years of creep that has seen the pendulum swing too far away from borrower beware to lender beware”.
Put simply, the government believes the lending laws are too strict, which makes lenders overly cautious about how much they lend, who they lend to, and the complexity of their application and vetting processes.
These changes should boost economic growth (at least short term), however the downside is borrowers now have a bigger responsibility to make sure they completely understand the credit products in which they are applying for and carefully asses their risks.
It’s not certain yet how much these rules could put borrowers at risk as the changes haven’t been revealed in detail and will need to pass parliament after a period of public consultation.
However, borrowers applying for credit cards and loans will need to do their homework and ensure they provide their lender with an accurate picture of their finances.
If you are want to chat more on this topic and talk through what it might mean for you, let’s chat on 1300 100 262 or firstname.lastname@example.org
For more information on these new laws, visit: www.moneymag.com.au/new-lending-laws-catch