Wednesday, 2 December 2020
Banking and Financial Services
That the Senate—
(a) notes that:
(i) the Government's proposed consumer credit reforms would:
(A) repeal responsible lending obligations that require banks to ensure that a loan is not unsuitable for an individual customer; and
(B) instead rely on prudential standards to manage risk and ensure the quality of consumer loans,
(ii) just this week:
(A) Westpac, Australia's oldest bank, admitted that it breached prudential standards by failing to meet liquidity requirements, and
(B) the Australian Prudential Regulation Authority said this demonstrates weaknesses in risk management, risk control and risk culture, and
(iii) these breaches of prudential standards were discovered during 2019 and 2020, after the Hayne Royal Commission, that was meant to bring an end to misconduct by the banks; and
(b) calls upon the Government:
(i) to honour its agreement to recommendation 1.1. of the Hayne Royal Commission, that the National Consumer Credit Protection Act 2009 not be amended to alter the obligation to assess unsuitability; and
(ii) ensure that, in the words of Commissioner Hayne, the law is applied as it stands.
The government has not reneged on its acceptance of this recommendation by the royal commission. Recommendation 1 states:
The NCCP Act should not be amended to alter the obligation to assess unsuitability.
With respect to this recommendation, Commissioner Hayne noted:
Consumer advocacy groups urged me to recommend that the NCCP Act be amended to require lenders to determine whether a loan contract (or credit limit increase) was 'suitable' for the consumer (as distinct from 'not unsuitable'). I do not favour that proposal.