1. Timing
 
The National Credit Code legislation will come into effect in 1 January 2010 and commencement of the responsible lending provisions for credit providers and finance brokers is deferred until 1 January, 2011. The ABA welcomes the deferral of the responsible lending provisions by 12 months.

However, the lead times for both the commencement of the Code and the responsible lending provisions may be too short to see the regime operate successfully and in the interests of consumers. The ABA looks forward to discussing the implementation issues with the Government to ensure a smoother transition process.
  
2. Clear distinction of roles and responsibilities in the credit chain

The ABA is pleased that the Federal Government has recognised the differences in the role of the broker, who is an advisor, and the lender, who approves or declines the provision of credit. The pre-application process will apply to finance brokers, but not to banks. This is because brokers have an advisory role in the credit process leaving the actual lending decision to the lender to make responsibly.
  
The ABA is pleased that bank customers will now be spared an additional and unnecessary pre-application process. Under the initial proposed legislation, the ABA identified that this process would be convoluted, would complicate the lending decision process, be time-consuming, costly and would have annoyed customers.

The ABA is pleased to see that criminal sanctions for breaches of the responsible lending rules have been reduced from five to two years.

The banking sector supports the principle of responsible lending. Banks have set a high standard, providing credit to consumers in accordance with their needs for decades and their lending performance remains in marked contrast to overseas financial institutions.

Sanctions are appropriate for serious misconduct, but the ABA believes that jail time is a disproportionate criminal penalty for a breach of this law. We would like to continue discussions with the Government on this issue.

Mr Bell concluded: “These key elements in the Bill go in the right direction. Our members will be giving the detail of the Bill further consideration in the coming weeks and remain committed to working for smooth transition to the new legislation.”

In the interests of greater certainty, the ABA believes that as much of the regime as possible should be ‘hard wired’ into the principal legislation, rather than in the regulations and other ASIC guidance documents which can be subject to more frequent and variable adjustment which creates more cost for the banking sector.