Big Four pressure senators to pass irresponsible lending reforms

The Morrison Government recently put its proposed changes to responsible lending laws on hold, with the Senate now scheduled to vote on the bill in June.

Banking industry leaders have been lobbying senators to pass the reforms, with National Australia Bank CEO Ross McEwan contending that scrapping the responsible lending laws will not result in a surge in risky lending.

The Morrison Government will require the support of at least three crossbenchers to pass the bill, given that Labor and the Greens oppose the abolition of responsible lending laws.

From The AFR:

Australian Banking Association chief executive Anna Bligh, who is accompanying bank executives in Canberra, said the changes were about the “speed and ease” of loan applications and ending overlapping regulation…

“We do not want a return to the bad old days of no-doc home loans that led to a high level of mortgage defaults,” [One Nation Senator Malcolm Roberts said]…

“I am also concerned that the home loan market is at unsupportable levels and allowing less diligence in lending is the last thing the economy needs right now”…

“Removing RLOs [responsible lending obligations] would not only tear down protections for customers but expose the economy to unnecessary risk at a time when housing prices and mortgage lending are experiencing rapid growth,” [Labor financial services spokesman Stephen Jones said]…

This issue is really about due process.

Only two years ago, the Hayne Banking Royal Commission (RC) released its final report. The RC was so concerned about predatory lending that its very first recommendation was to maintain responsible lending obligations in their existing form:

The Hayne Banking Royal Commission’s central recommendation was to keep responsible lending laws.

The only thing that has changed between now and then is that Australia’s mortgage and property market are experiencing massive booms and regulators are becoming increasingly concerned about lending standards, with many commentators tipping that APRA will soon be forced to step in with macro-prudential tightening.

New mortgage commitments are experiencing a record boom.

With mortgage commitments running at an all-time high, there is clearly no issue with consumers gaining access to finance. Quite the opposite.

Given these truths, now is precisely the wrong time to contravene the Hayne RC and scrap responsible lending obligations. Doing so would only pour more fuel on the mortgage/housing bonfire.

It would also force APRA to hasten macro-prudential tightening, meaning that lending policy and prudential regulation would be working at cross-purposes.

In short, the Senate must uphold the Hayne RC, block the legislation, and keep responsible lending obligations in place.

Unconventional Economist


  1. For the Totes of this world, this is an example of a positive difference between Labor/Greens and those rapists in the Coalition.

  2. The banks are already writing loans without any restrictions. It’s off the hook.
    So I don’t know why they care. It might be about covering their behind and pushing responsibility over to the lender, but again who cares? It’s not like they are going to get fined or anything.

    • The Incomparable Mr Flannery

      Well, not quite.

      I just enquired if I could borrow 1 Million (D/I of 10x). “Um no” was the polite response.

        • The Incomparable Mr Flannery

          Perhaps a table could be compiled with relevant variables.

          Big 4, ubank, BWA, building society
          6.6x LTI
          no other debt
          1 income
          2 dependents
          2 x 2k credit cards
          LVR <0.7

        • happy valleyMEMBER

          I would have thought most banks would be careless – it’s other people’s money (mainly depositors) that they are p.ssing up against the wall, so why the need for care?

        • 9 times? Clearly no-one ever pays back the principle. And why bother, with 100% up every 7 years, soon a 0% deposit will be 50 % equity.
          Should be going to 20 times income after the ILL laws , as interest rate is about 1.5%. Earn the average wage of say 60K, borrow 1.2 million !

      • Jumping jack flash

        There are still eligibility criteria to satisfy.. its not a free-for-all.

        This is the reason for the current global push to get inflation restarted.
        If the lowliest Deliveroo driver can get paid 200K a year due to inflation, imagine how much debt that will give him access to.

        Sure a coffee may be $50 but median house prices will reach 10 million by 2050, and that’s where they need to be.

        • The Incomparable Mr Flannery

          Of course they are.

          The original comment was:

          The banks are already writing loans without any restrictions. It’s off the hook.

          Let’s not let hyperbole get in the way of our group histrionics though. Carry on chaps, old men shaking fists at the sky, as one!

  3. kierans777MEMBER

    I’m tempted to make some phone calls. Who’s the best to call and ask not to pass this absurd legislation?

      • Jumping jack flash

        She’s all good. The banks would never ask for legislation that would harm them.
        Its like putting the business lobby in charge of immigration. No problems there either.

        Pollies don’t have time to worry about these minor details, they’re far too busy focusing on the important issues and making the hard decisions!

  4. Jumping jack flash

    Irresponsible lending?
    Just making debt available to everyone who needs it, which is everyone, because debt is now absolutely and positively essential to own. As essential as access to reliable energy and clean water. And not just any old pile of debt either, everyone needs to be eligible for the biggest and baddest pile of debt you’ve ever laid eyes on! Hundreds of thousands of freshly magicked-up debt dollars plonked into the economy to give it the illusion of growth.

    Just try getting by without owning a gloriously huge debt pile. Its virtually impossible.

    • How did we get here? We’ve always needed energy and water. We’ve only officially “needed” debt since the late 90s or so.

      • Jumping jack flash

        The banks were put in charge because the pollies couldn’t be arsed, plus they were sick of the whinging and pre-election political fodder.

        Signing over the economy to the care of the banks was just another tick-and-flick in the name of Thatcherism/Neo Liberalism.

        • And the governments supported those banks with endless inflationary grants, schemes and tax discounts because it wasn’t enough to hand that power over to the banks.

          • Jumping jack flash

            I would say that the banks developed a water tight plan to make themselves richer forever, but initially they overlooked removing one important feedback, or possibly didnt foresee it, and that was the feedback between inflation and interest rates.

            The whole thing crashed, requiring almost 2 decades of bailouts.

            After that, CPI suppression became the name of the game and continues to this day, long after the banks moved to decouple inflation from interest rates.

            Stop suppressing CPI. Let it soar and then the banks’ economy can start working properly for the second time in history.

  5. happy valleyMEMBER

    ” … regulators are becoming increasingly concerned about lending standards …”

    The RBA turbocharged with its effective ZIRP, the latest boom and I doubt it feels any guilt in what it has done nor do plods APRA or ASIC really care much about the situation as self-interest always wins?

    I guess it is just a matter of which of the big 4 does the most irresponsible lending, with or without Josh Rainbowberg’s irresponsibility mandate, in desperation to push money out the door to anybody with a pulse – back to the future?

    • Jumping jack flash

      Back to the past. To 2006 to be precise. Back then we had the big 3 all going on, rising wages, rising inflation, and rising debt. The banks (therefore everyone) desperately want to return to that period of time.