(28 April 2009 – Australia) The federal Government has released a draft bill for the responsible lending to consumers, under which consumers can sue lenders if they have been given an unsuitable loan.Senator Nick Sherry, Minister for Superannuation and Corporate Law, has today released the draft National Consumer Credit Protection Bill 2009 which will put in place new national responsible lending laws for all consumer credit in Australia.
The bill means that as a condition of holding an Australian Credit License (ACL), lending must be done responsibly.
The bill covers all forms of consumer credit and it will become an offense to supply credit irresponsibly.
The new law entails two elements for assessing whether credit is being extended responsibly. These are assessing the unsuitability of a credit product for an individual, and assessing a persons’ capacity to repay the proposed credit debt.
The laws will also make it illegal for brokers and other intermediaries, i.e. credit service providers, to suggest credit for a consumer that is unsuitable based on their needs and their financial capacity.
The bill, to be enforced by ASIC, will allow for criminal penalties up to five years and civil penalties of up to A$220,000 for an individual and A$1.1 million for a corporation.
Questionable operators on the margins who cannot meet these new national standards will not be allowed to engage in credit activities and will be forced to exit the industry. This stands to assist the very good reputation of those mainstream lenders and brokers who comply with the law, Minister Sherry said.
Uniform national licensing will also lead to a major reduction in red-tape for credit-related businesses as all regulation will move to one jurisdiction.