Consumer groups slam Coalition’s gutting of responsible lending laws

A consortium of consumer groups have rightfully slammed the Morrison Government’s planned axing of responsible lending laws, issuing the following media statement:


Consumer groups slam move to remove responsible lending laws

Removing credit protections will cause harm to people and the economy 

CHOICE, Consumer Action Law Centre, Financial Counselling Australia and Financial Rights Legal Centre have responded to the Government’s announcement that it will remove credit protections for borrowers saying right now what people need is more income, not more debt.

Government’s proposed reforms will remove bank responsibility to customers, opening up new opportunities for banks to aggressively sell debt.

Quotes attributable to Karen Cox, CEO of Financial Rights Legal Centre and opening witness to the Banking Royal Commission

“The problem people are having right now is too much debt and not enough income. The Government’s solution is to take on more debt with fewer protections. Unsustainable debt hurts real people and is a short-sighted fix for a flailing economy.

“Watering down credit protections will leave individuals and families at severe risk of being pushed into credit arrangements that will hurt in the long term.

“Our service helped thousands of Australians drowning in debt and we continue to see legacy debt that predates the Hayne Royal Commission. How can we have so quickly forgotten the hard lessons from the GFC and the Hayne Royal commission?”

Quotes attributable to Fiona Guthrie, CEO of Financial Counselling Australia

“As we learnt to our cost during the GFC, weaker lending standards mean people will be loaded up with as much debt as possible. There is significant profit to be made in pushing borrowers to the edge.

“Removing responsible lending obligations will free banks up to aggressively push credit onto their customers.”

Alan Kirkland, CEO of CHOICE

“We got rid of the idea of ‘buyer beware’ in consumer law decades ago. To make it the principle that guides lending in the middle of a recession has disaster written all over it.

“Piling more debt onto people who can’t afford it has never solved an economic crisis.

“Products like credit cards are complex. That’s why banks make so much money out of them. Banks are in a much better position to assess a person’s ability to repay, so they need to shoulder some of the responsibility.”

Quotes attributable to Gerard Brody, CEO of Consumer Action

“Responsible lending laws ensure safe access to credit.”

“The Commonwealth Bank recently said that the flow of credit is above pre-COVID levels and that lending is growing at a strong pace. And none of the big banks opposed the responsible lending laws at the recent House of Economics committee hearings.”

“Leaving people with more debt they can afford is no way out of an economic crisis. Pushing too much credit that people can’t afford to repay creates hardship, stress, anxiety for individuals and families.”

Labor and the Greens must unite to block this legislation.

Unconventional Economist
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  1. Labor will probably fold like a warm Mars bar……….. The Greens are still figuring out how to get more people with a pulse into the country

  2. Responsibility? What’s that?
    Responsibility? Not quite yet
    Responsibility? What’s that?
    I don’t want to think about it; we’d be better off without it

  3. “Labor and the Greens must unite to block this legislation.” – why do you think I call Albo – Me Too Albo? Yeah, sure Leith, Labour will vote against it.. lol

  4. we truly live through the most corrupt period in Australian history. I doubt Australia ever had bigger scum in Gov the the current lot.

  5. happy valleyMEMBER

    Mark 25 September 2020 down in your diary as the day a gubmint let its bank go totally rogue. Well past time to remove any money you have on deposit with our banks.

    • Jumping jack flash

      Too late.

      It was around 1999 or slightly before, when interest rates were first manipulated to counter the dotcom bust with an explosion of debt spending.

      After about 10 years of debt spending the earth was completely subjugated to the banks, then sometime during 2008 banks declared themselves TBTF and cemented their dominance over the earth.

  6. Anyone dealing in a substantial way with a pty ltd at this time should insist on a director guarantee.

    The 12 month suspension of the laws around trading while insolvent is certain to be abused by some – trading unconscionably or rearranging their affairs to stuff an empty shell with liabilities – while others will simply go down the gurgler under the pressures of Covid.

    You don’t need the heightened risk of default without recourse.

    • Our company now makes all none account customers paid for their products up front. We have stop showing any grace to our account customers ( we lost a long term account customer last week because of this). Our MD doesn’t see how this can end well.

  7. Says the banks are in trouble. Zero interest rates coupled with anaemic credit growth, increasing insolvencies, challenges in managing their risk metrics as people defer mortgage payments or move to interest only, increased compliance costs, increasing challenges from technological change (Defi)… wouldn’t want to own a single bank stock…

    • happy valleyMEMBER

      Wouldn’t want a dollar on deposit with our banks either. They will soon be toxic, if they aren’t already.

    • I honestly wonder how bad things are behind the scenes at Westpac given their mad investor lending to offshore Chinese. How many of these investors are never going to start paying again???

      • Reus's largeMEMBER

        This is the herd of elephants in the room, good time to “ditch” the underperforming wager on Oz RE, probably got the 95% loan to start with and relying on renter scum to pay mortgage so easy to just walk away with a 5% loss than a 20% loss and have the CCP knock on your door too.

  8. How the hell does this NOT end in mass carnage?
    This economy was toast about 15 years ago, the market has been so bloated for so long….it’s going to be spectacular. It will be a supernova!

    Anyway, it’s full steam ahead with exit Australia plans pour moi.

  9. Display NameMEMBER

    There is enormous asymmetry in power and information when it comes to the relationship between the bank and the lender. Banks lend millions of loans. The average punter will do one or two housing size loans in their lives. It is this asymmetry that places the vast majority of power in the banks hands and requires that there is a duty of care that the bank acts in the best interests of the lender. It financial vandalism to remove the responsible lending laws.

    Banks are also wards of the state to a large degree. No other type of company operates at the same leverage ratios or exists so totally based on trust. This special position mandates that they honor that social license. Personally I think banks should operate as cost plus utilities. For most of us retail banks only need to be very, very simple. A few account types and we are done. Break the big four up, split them on retail and wholesale lines and ban the retail bank from anything but loans. No prop trading or derivatives bar hedging. The wholesale banks can do what they want, but no gov guarantee.

    • In times of trouble you find out who’s got your back.

      Will be paying attention to who speaks out against this and which way they vote.

      Good to see the consumer groups speaking out against it.

    • Agreed. But it will not happen until the system has a near death experience sufficient to make a financial system reset plausible and possible. As I see it, there are simply too many shortsighted players with an interest in maintaining the status quo. By way of an example, I find that even relatively senior personnel in the big 4 I have encountered have a loose, if not poor, understanding of moral hazard. Their jobs rely upon short-term gains being achieved, not long-term financial and social stability, and they argue accordingly.

  10. Like I keep saying, the govt with throw the kitchen sink at the bubble. There is no interest in a correction, nor a political future. It’s all gone too far to turn back.

  11. happy valleyMEMBER

    So what Josh is telling me is that if he had money on deposit with a bank, he’d be happy for the bank to be able to lend his deposit out, no questions asked. I doubt he’d be happy exercising that much blind faith in known and proven reprobates, so why should any depositor be happy with what he is proposing. Time to remove deposits from banks before banks lose them for us.

    All Josh has done for me today is to confirm how this best-ever economic managers LNP federal gubmint operates ie they believe anything that is put in front of them? No care, no responsibility?

    • JamesTheBearMEMBER

      So while I agree with the sentiment, I have way too much cash in banks. I’m trying to protect myself a little by not having more than 250K in any one bank (other than my offset), but it’s an honest question, where else can I put it?

    • Banks do not lend deposits, they create money when loans are written. The treasurer is trying to get the banks to create more money by issuing more housing “loans” so that house prices don’t fall.

  12. happy valleyMEMBER

    As today is clean-out day for Josh, can we also wind up the “retirement villages” that are the RBA, APRA and ASIC?

  13. Ok – Remove responsible lending laws
    But also remove the deposit guarantee so people understand there is more risk with banks.
    Bring Bail in laws so deposits cannot be used to stabilize the bank
    And then let the bank fail, no government coming to the rescue or any type of support if they get lending wrong
    Fudge it – just deregulate the whole industry

    • The Deposit Guarantee has been bastardised in recent years.
      It’s worth virtually nothing in a crisis to the average punter. But it looks good on paper.

      • happy valleyMEMBER

        True and we have de facto bail-in legislation, so basically the only course of action is to take your money out of the banks as Josh has just licensed them to do the most irresponsible lending of all time and so it’s only a matter of time before one or more of them implodes under the weight of their dud loans.

  14. Jumping jack flash

    Consumer groups? Pfft! What have they ever done for the prosperity of Quiet Australians trying to have a go? They are the epitome of the anti-go.

    What does the business lobby say? “More debt, please”, they will say. And rightly so!
    We need more debt and lots of it to keep this ball of debt we call an economy working.

    We need to run this thing into the ground, a veritable fireball of debt, with Joshy-boy at the wheel grinning inanely.

  15. happy valleyMEMBER

    “Labor and the Greens must unite to block this legislation.”

    DL-S characterises Captain Phil and Josh Rainbowberg as Dumb and Dumber. Well with LVO calling for Labor and the Greens to block this legislation he is expecting an equally useless pair of Dumb and Dumber to do something sensible and responsible. Quite frankly, there’s no hope.

  16. They should make loans non-recourse to at least make banks and mortgage brokers think twice before they manipulate borrowers into taking out mortgages they are unable to service.