Financial counsellors say safe lending laws must not be axed
1 February 2021 at 6:29 pm
“These changes will harm individuals and families and are the last thing Australia needs as we chart a path to economic recovery”
Over 90 per cent of financial counsellors believe they will see more vulnerable clients saddled with unaffordable debt if the Morrison government’s plan to axe responsible lending laws is successful, new research reveals.
A survey from Financial Counselling Australia (FCA) found almost all (97 per cent) financial counsellors want safe lending laws to remain, with 93 per cent stating they use these laws to advocate for their clients.
Treasurer Josh Frydenberg has argued these changes – which would weaken legal protections against aggressive lending approaches – are needed to increase the flow of credit to small businesses and households and help Australia’s COVID-19 recovery.
But financial counsellors and community groups disagree, warning that this will just create a “debt disaster” as more people are loaded up with debt.
The survey found 92 per cent of financial counsellors agreed that they will see more clients with unaffordable debt if protections are axed.
FCA CEO Fiona Guthrie noted that the proposed legislation contradicts the first recommendation from the banking royal commission report, which said laws should not be amended to alter lenders’ obligation to assess if someone is suitable for a loan.
“The federal government accepted this recommendation, but it now plans to axe the law, meaning vulnerable people will no longer be protected from getting into massive debt traps,” Guthrie said.
“These changes will harm individuals and families and are the last thing Australia needs as we chart a path to economic recovery. More debt is just a recipe for disaster.”
Anglicare Australia executive director Kasy Chambers said Parliament cannot let these responsible lending laws be axed.
She said people have never been more vulnerable to bad lending tactics, with many losing their jobs or having their hours reduced.
“The last thing they need is to be saddled with debts they can’t afford. Sadly, we know that the people who can least afford it are the most likely to fall victim to these debts,” Chambers said.
“The royal commission already showed that some lenders knowingly prey on people. Getting rid of these laws will only make that easier.
“At a time of crisis, the government should be protecting people most in need – not hurting them.”