125 organisations pen letter opposing plan to axe responsible lending laws

author-avatar By on November 24, 2020
125 organisations pen letter opposing plan to axe responsible lending laws

Photo by Scott Graham on Unsplash

An open letter launched today says axing safe lending laws will be bad for borrowers and the economy, and will contradict findings from the Royal Commission.

Treasurer Josh Frydenberg's plan to make it easier to get a home loan has been opposed by 125 organisations in the letter, which includes the Consumer Action Law Centre, Financial Counselling Australia, and the Australian Council of Social Services (ACOSS). 

In a bid to kickstart the COVID recovery, the Federal Government is looking to remove the onus on lenders to ensure they don't lend to people who can't service a loan, shifting the responsibility to borrowers. 

The government forecasts the changes will cut through red tape and accelerate the credit approval process. 

But community groups believe the reforms will leave people worse off and lead to a debt disaster, with Australia in recession and already having the second highest level of household debt in the world. 

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
WIN YOUR HOME LOAN INTEREST FREE

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • WIN your home loan interest free and save up to $1.1 million. Refinance by 29 October. T&Cs apply.
  • Refinance Only. Fast online application, refinance in minutes, not weeks.
  • No Nano fees, Free 100% offset sub account. Mobile app. Visa debit card & instant payments.
WIN YOUR HOME LOAN INTEREST FREE

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • WIN your home loan interest free and save up to $1.1 million. Refinance by 29 October. T&Cs apply.
  • Refinance Only. Fast online application, refinance in minutes, not weeks.
  • No Nano fees, Free 100% offset sub account. Mobile app. Visa debit card & instant payments.
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services

Rates correct as of September 27, 2021. View disclaimer.

"Responsible lending laws were designed to stop the reckless lending we witnessed throughout the global financial crisis and the Royal Commission," Karen Cox, chief executive (CEO) of Financial Rights Legal Centre said. 

"It’s beyond belief that less than two years after the royal commission made this its first recommendation that the government wants to go directly against it.

“Before safe laws were introduced, lenders regularly sold unaffordable loans to people, including pensioners, people on Centrelink payments and casual workers, who they knew would never be able to repay the loans.”

In the wake of the Royal Commission and the 'ASIC v Westpac Shiraz case', banks and Reserve Bank (RBA) Governor Philip Lowe, voiced concerns lenders had become too conservative in their lending and the flow of credit was too slow. 

Australian Banking Association CEO Anna Bligh said these reforms would be a positive step for the Australian economy. 

"The government’s changes will simplify the system while preserving protections and ensuring customers still have a right to have complaints resolved by AFCA [Australian Financial Complaints Authority]," Ms Bligh said.

"A simpler system means a faster, less complicated process for customers.”

Australians exposed to "terrible lending practices"

Fiona Guthrie, CEO of Financial Counselling Australia, said many people were struggling financially at the moment, and the last thing they needed was to be loaded up with more debt. 

“We implore the Senate to listen to the warnings of financial counsellors, because our only interest is that of our clients'," Ms Guthrie said.

"We cannot in good conscience sit by and let these laws go through without doing what we can to stop them.

“Even with the current responsible lending laws financial counsellors still see too many vulnerable people with too much debt. We despair at the thought that this will get worse.”

Organisations said the open letter is supported by new national polling which found 79% of people thought banks should be required to always check a customer's ability to repay before offering a mortgage.

Gerard Brody, CEO of Consumer Action Law Centre, said under the reforms, borrowers would have existing rights to sue their lender for unsuitable lending removed. 

"Lenders would also have far fewer incentives to comply with good lending standards, because penalties for breaching laws are being removed and weakened," Mr Brody said.

“Newly released November 2020 polling shows that 82% of people believe there should be fair compensation for people when they are wronged by financial institutions.

"The government's plan puts this at risk.”


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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