In his address to the Responsible Lending and Borrowing Summit, Assistant Treasurer and Minister for Financial Services Stephen Jones outlined the government's position on: responsible lending reform; buy now pay later (BNPL) regulation; and payday lending and consumer leasing reform. We've summarised the key points below.
Responsible Lending
Mr Jones made clear that the government has no intention of rolling back existing responsible lending obligations (RLOs) as proposed by the previous government, noting that to do so would be contrary to Commissioner Hayne's recommendation that they be retained without amendment (Hayne Recommendation 1.1).
[Note: The former government's National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 (which has now lapsed), proposed to implement major changes to consumer credit laws including rolling back responsible lending obligations]
Mr Jones said:
'Our current responsible lending laws achieve an appropriate balance between facilitating access to credit and protecting consumers – particularly in the current environment of rising interest rates and costs of living'.
BNPL Regulation
Citing the findings of the Australian Finance Industry Association's report on the Economic Impact of Buy Now Pay Later in Australia, Mr Jones observed that:
'BNPL plays an important role in providing low cost and convenient credit to consumers. However, we must be mindful of the risks that may arise from innovation and ensure our regulatory frameworks remain fit for purpose in light of evolving technologies and business practices'.
Mr Jones flagged plans to consult on options to 'improve the regulation of credit in Australia', which he made clear includes BNPL.
Having said this, Mr Jones appeared to suggest that BNPL products may not necessarily be subject to the same requirements as other credit products. Mr Jones observed that:
'BNPL products are unique and any future regulatory framework needs to reflect that'.
Mr Jones also said that the government is monitoring how other jurisdictions are approaching BNPL regulation, including the UK which has flagged its intention to regulate BNPL products as credit products 'in a tailored way'.
Pay Day Lending and Consumer Leasing Reform
Mr Jones also said that the government planned to 'take action' to strengthen consumer protections for the many and often vulnerable consumers accessing pay day loans and small amount credit contracts (SACCs).
Mr Jones said:
'The previous government knew these products target low-income Australians who don’t have access to other regulated credit products, and that they disproportionately dominate the casework of financial counsellors and credit lawyers. In Opposition, Labor pushed strongly for these reforms. Predatory credit products take advantage of existing financial vulnerability…Labor is committed to taking action to strengthen consumer protections'.
Importantly, though Mr Jones referenced the previous government's failure to legislate changes to payday loans and consumer leases to strengthen consumer protections, and Labor's strong support for reform while in Opposition, he did not expressly commit to reintroducing a Bill (which was previously supported by Labor, but which has now lapsed) in its current form.
For context, the Bill is the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2019 (No. 2) (SACC Bill) which would (if reintroduced and legislated) implement the recommendations of the Independent Review of the Small Amount Credit Contract Laws. According to the Explanatory Memorandum, the Bill, which was introduced by Senators Griff (Centre Alliance) and McAllister (Labor) during the last parliament was a facsimile of exposure draft legislation released by Treasury on 23 October 2017 which the former government did not progress.
If the new Labor government wishes to progress the Bill, it would need to reintroduce it and the Bill would need to be enacted following the usual process.
The Consumer Action Law Centre (CALC) has previously called on the Labor government to prioritise legislating stronger consumer protections, including progressing the SACC Bill.
In a statement issued after Mr Jones' address, consumer groups including CALC reiterated their support for progressing the SACC Bill, as well as the government's commitment to retaining responsible lending obligations and the planned consultation on regulation of the BNPL sector.
[Sources: Assistant Treasurer Stephen Jones' Address to the Responsible Lending and Borrowing Summit, Sydney 12/07/2022; CALC media release 12/07/2022]
