Media Release

The Finance Sector Union has joined with policy think-tank The Australia Institute and Care Financial Counselling service to launch the Finance Sector Union’s Charter of Responsible Lending today in Canberra.

Rod Masson, FSU National Policy Director said the global economic meltdown has been caused by the irresponsible sale of debt to people with little or no capacity to repay it. He called on such practices to be eradicated in Australia by having the Government and industry adopt clear guidelines.

“The failure in the global market is a failure of responsibility by large financial institutions. We believe the Government should make it mandatory for banks to follow the Charter.  Australia may have weathered the global credit crisis better than other countries but disturbing trends are still emerging. Housing repossessions have doubled in the last four years and Australia’s level of personal debt is at a record high and continuing to rise – last year it represented 156% of GDP.

“It’s time the Government lead the way in restoring confidence and building professionalism in our finance sector by promoting responsible lending practices as outlined in our Charter. The forthcoming COAG meeting, which will discuss the transfer of responsibility for credit regulation from the states to the Commonwealth, presents an excellent opportunity to get this Charter in place.” said Mr Masson.

The Charter was developed in consultation with workers in the banking and finance industry.

“Our research shows that many Australians believe financial institutions have acted unethically in promoting the easy availability of credit. People don’t always know what they are signing up for, trusting that banks won’t let them borrow too much. Unfortunately banks have placed profits ahead of people in recent years,” said Josh Fear, Research Fellow at the Australia Institute.

“We are seeing more and more people experiencing severe debt stress coming to us for help from across a very broad section of the community, many of whom have been offered loans they clearly can’t afford,” said Carmel Franklin, Director of Care Financial Counselling.

“We strongly support the Charter of Responsible Lending. Banks should be offering products to consumers based on a proper assessment of people’s needs, and their capacity to repay the borrowing, not the risk to the bank,” said Ms Franklin.

The Responsible Lending Charter principles include:

• Prohibiting unsolicited pre-approved credit offers;
• Informing consumers of any commissions, bonuses or incentives staff may receive for making a sale;
• Requiring financial institutions to improve their credit risk management by developing programs to help consumers in rescheduling credit payments;
• Loans and credit products being based on assessment of consumer needs and demonstrated capacity to repay.

ENDS
- Rod Masson, Finance Sector Union - 0408 374 677
- Carmel Franklin, Care Financial Counselling – 02 6257 1788
- Josh Fear, The Australia Institute – 0403 424 866

Media: Gemma Swart (EMC) 0414 873 291
For a copy of the Charter of Responsible Lending click here.