Sydney, 17 September, 2007: The Australian Bankers’ Association (ABA) has welcomed a report which makes recommendations to fight against predatory lending in Australia.

The report “Home Loan Lending” followed an Inquiry by the House of Representatives Standing Committee on Economics, Finance and Public Administration into home loan lending practices and the processes used to deal with people in financial difficulty.

David Bell, Chief Executive of the ABA, said: “Bank housing lending defaults are at very low levels and that while changes have occurred in the housing finance market, bank credit standards remain sound. We are pleased that the Committee is seeking ways to reduce the numbers of predatory lenders for the protection of the Australian borrowers.” The ABA’s view on the committee’s three main recommendations:

1. The Australian Bureau of Statistics should begin collecting and publishing annual data on housing repossessions.
   
   The ABA believes that it is important that there is more information provided on the applications for repossessions which are made to the State/Territory Supreme Courts. The ABA has previously said that if more detailed information was to be made available this will help the public debate.  Based on ABA analysis of data and discussions with Supreme Courts, it is reasonable to suggest that anywhere between 65% and 80% of applications do not relate to banks. A recent report¹  by the Consumer Action Law Centre of ACT found that 68% of actions for possession over the four years 2002 – 2005 were undertaken by non-bank lenders and they were largely responsible for the substantial increase in the number of actions initiated during 2005.
   
   
2. Commonwealth Government should regulate credit products and advice. This includes the regulation of mortgage brokers and non-bank lenders.
   
   The ABA is currently looking at all options for the best way to regulate consumer credit going forward.  These include: maintaining the status quo, tightening requirements so that there is genuine national uniformity of consumer credit legislation and transferring regulation of consumer credit to the Commonwealth.

   While the ABA sees merit in the Commonwealth having sole legislative responsibility for the national regulation of consumer credit, the practical implications of this move need to be carefully considered.  There will be customer implications and regulatory implications for banks that will need to be carefully considered if this change is made. It is important to note that the Productivity Commission is currently undertaking an Inquiry into the Consumer Policy Framework on ways to improve the harmonisation and coordination of consumer policy and its development and administration across jurisdictions in Australia.
   
   The ABA believes that mortgage brokers should be regulated like other financial service providers to protect home buyers. For three years, the ABA has been calling for the national regulation of mortgage broking because proposed State-based regulation, under consideration since 2002, has failed to materialise.
   
   The ABA is open to proposals to regulate non-APRA regulated housing lenders.  A clear public policy objective will need to be defined to advance this proposal. The policy objective might be to ensure that all lenders have the same high lending standards that banks and other reputable lenders in the market currently exhibit.

   The ABA is particularly interested to ensure that fringe credit practices relating to home lending are addressed.  The ABA along with consumer groups and other financial industry bodies have formed a new coalition to discuss mounting concerns about predatory lending.
   

3. The board of the Banking and Financial Services Ombudsman (BFSO) should increase its jurisdictional limit to $500 000 (to be indexed annually). Other External Dispute Resolution (EDR) schemes should consider the appropriateness of their limits.
   
   The ABA does not understand why the BFSO’s jurisdictional limit should increase without all other EDR schemes also increasing their limits. These limits should be consistent across all relevant EDR schemes.

For further information:

Heather Wellard
Director, Public Relations
Phone: 02 8298 0411
Mobile: 0409 830 439

ENDS