The Federal Government has released its new Consumer Credit Bill for consultation this week with many of the key elements of the bill reflecting the FSU’s Charter of Responsible Lending.

In fact, the key features of the proposed legislation mirror the call by FSU members for a focus on customer needs, their ability to repay and a focus on increasing the professionalism of the credit industry.

The bill seeks to: 

• Establish one national set of regulations for the provision of credit;
• Introduce a responsible lending requirement – including a requirement to assess the suitability of products and  the capacity to repay;
• Introduce a new licensing regime for the providers of credit which will include standards of conduct and improved education and training requirements;
• Make it compulsory for credit providers to members of independent, low-cost dispute resolution bodies;
• Require commissions and fees on products to be revealed to consumers;
• Provide greater resources to the ASIC to monitor the new regime;
• Provide greater assistance to consumers both through further emphasis on financial literacy and financial hardship assistance.

The bill ticks 6 of the 10 points that the FSU was seeking through its Charter of Responsible Lending.

The points that still require address are:

• the need to stop unsolicited, pre-approved credit offers – such as credit card or credit limit increases;
• providing consumers with an “opt-out” facility that informs the service provider not to pitch products;
• expanding the requirement to disclose commissions on products to include bonuses, incentives or other remuneration implications;
• addressing the overemphasis on sales targets in determining remuneration outcomes.

The FSU will be making a further submission on the proposed bill advancing the arguments for why these measures should also be adopted, either as part of this bill or in the second round legislation due next year.

The bill should be welcomed by finance workers as it aims to ensure that we rid our industry of shonky practitioners, increase the professionalism of the roles we play in the community and help Australia avoid the practices in the US that have brought about the global financial crisis.

It should also mean a greater emphasis on proper training and accreditation of members involved in the provision of credit.

Employers in the industry should also welcome the bill. Most are already compliant with the general thrust of the bill. For those that are not, predominantly the non-ADI (the non-bank, credit union and building society) sector it will mean a lifting of standards that protects both the consumer and the industry.

Related material:

Copy of FSU media release in relation to the bill

Exposure draft bill

FSU Charter of Responsible Lending