Nearly 6 months after first being proposed to the Parliament, a bill to reform the consumer credit laws has reached the final phases of the legislative process. In September 2020, Treasurer Josh Frydenberg announced a raft of reforms to the National Consumer Credit Protection Act (2009). The changes were proposed as a measure to ease the flow of credit to consumers and small businesses to stimulate the economy due to the effects of the coronavirus pandemic on the economy. At the time of the announcement, we posted a detailed article that covered the implications for our Jade Car Loans customers. Now, as the legislation reaches the final phase, we’re updating with the latest developments and recapping the background, to keep customers across what these changes may mean to their car loan applications.
Proposed Changes: Recap
The need for change to existing consumer credit laws was primarily based on streamlining, simplifying and speeding up the application approval process and eliminating what was seen as some duplication in the system. The focus was on the home loan and small business loans area but the Act covers many types of consumer loans including personal car loans.
The existing approvals process was seen as placing the obligation on the lender to in many ways, apply a one-size-fits-all framework in assessing loan applications. The obligation is on the lender to assess the applicant’s ability to meet the commitments of the new loan. Of particular note, is an assessment of discretionary spending. This is how a person spends what money they have after all their essential and ongoing financial commitments are met. For example, do they go out for expensive dinners? This is worth noting as it was included as a key point in the submission made to the Senate committee by the Australian Banking Association.
The proposed changes would shift the onus of responsibility more to the loan applicant, the borrower, to prove they could meet the commitment. The changes would also give lenders increased flexibility in assessing applications based more on debt and income rather than current spending patterns.
Legislative Process of Change
The process to change Federal laws can be lengthy as it involves the Bill being passed by both houses of Parliament – the House of Representatives and the Senate. In the current Australian Federal Parliament, the Government does not hold the balance of power in the Senate so the passage of bills often requires negotiations with cross-bench senators and amendments incorporated.
With the changes to the credit laws, a period of consultation was undertaken by a Senate Committee and that involved receiving submissions from stakeholders and interested parties. Understandably some submissions supported and opposed the changes.
The submission by the Australian Banking Association included mention that borrowers/loan applicants could change their discretionary spending behaviour to accommodate payments on new loans, especially in the realm of commercial car finance. As such, applications should be assessed on debt/income rather than current discretionary spending. Those opposing the changes argued along the lines that easier credit had the potential to create financial difficulties for many consumers.
The reforms do however include continuations of protections for vulnerable consumers.
With hearings completed, the committee considers the situation and submits its report and recommendation to the Parliament. On 12 March that occurred with the Committee’s report supporting the changes essentially as proposed.
The Treasurer originally flagged 1 April 2021 for the implementation of the reforms, so the Bill now enters the last stage, debate and vote in the Senate.
Effect of Reforms on Car Loans
Jade Car Loans is a licensed credit provider and as such we adhere to the responsible lender guidelines as set out by ASIC and operate by the consumer credit laws regarding personal car loans.
- For those that have existing personal secured car loans, changes to the credit laws would not affect your loan.
- If you currently have a car loan application in progress, it will be handled by your Jade consultant and assessed by our lenders based on the current consumer credit laws and guidelines.
- For those considering applying for a car loan in the coming times: if/when any changes to the consumer credit laws are enacted, your application would be assessed for approval based on those laws. That may mean a more simplified and speedier process.
While some see the existing approvals processes as at times taking too long and being too complex, Jade Car Loans does provide a quick quote and fast approval services for car loan applications. Having a Jade consultant handling your loan application and assisting with the necessary paperwork can be extremely beneficial in streamlining the overall process. Notably, they also offer affordable business car finance rates, ensuring that businesses can secure the vehicles they need without breaking the bank.
As we are heavily involved in consumer lending, we will be closely monitoring the progress of this Bill through the Parliament and will post updated articles when developments occur. If you have any queries about applying for a car loan, please don’t hesitate to reach out to us to address your questions.
For a quick quote or to apply for a car loan, contact Jade Car Loans at 1300 000 003
DISCLAIMER: IN REGARD TO MISREPRESENTATIONS AND ERRORS CONTAINED IN THE MATERIAL AS PRESENTED, LIABILITY IS NOT ACCEPTED. THE DETAILS AND CONTENT IS PROVIDED FOR CAR BUYERS AND INDIVIDUALS AND BUSINESS SEEKING FINANCE PURELY AS GENERAL INFORMATION. THIS IS NOT PROVIDED AS THE ONLY SOURCE OF FINANCIAL INFORMATION. ANYONE THAT CONSIDERS THAT NEED FINANCIAL ADVICE ABOUT THEIR SPECIFIC REQUIREMENTS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.
