125 organizations write letter opposing plan to scrap responsible lending laws

Treasurer Josh Frydenberg’s plan to make it easier to get a home loan was opposed by 125 organizations in the letter, including the Consumer Action Law Centre, Financial Counseling Australia and the Australian Council of Social Services (ACOSS).

In an effort to jump-start the COVID recovery, the federal government is seeking to remove the responsibility of lenders to ensure they don’t lend to people who can’t repay a loan, shifting responsibility to borrowers.

The government expects the changes to cut red tape and speed up the credit approval process.

But community groups believe the reforms will make people worse off and lead to a debt disaster, with Australia in recession and already having the second highest level of household debt in the world.

Are you buying a house or looking to refinance? The table below shows home loans with some of the lowest variable interest rates on the market for homeowners.


Variable More details
  • A low variable rate home loan from a 100% online lender. Supported by the Commonwealth Bank.
  • A low variable rate home loan from a 100% online lender. Supported by the Commonwealth Bank.
Variable More details
  • 30% minimum deposit
  • No monthly or ongoing fees, add 0.10% compensation
  • Unlimited redraws
Variable More details
  • Get ahead with up to $4,000 cash back*
  • Unlimited additional refunds
  • Easy online application, quickly find out if you are approved!
  • *When you purchase or refinance a qualifying home loan. Apply before 11/30/22. Pay before 01/31/23. Exclusions and terms and conditions apply.

Basic criteria: a loan amount of $400,000, variable, fixed, principal and interest (P&I) real estate loans with an LVR (loan-to-value) ratio of at least 80%. However, the “Compare mortgages” table allows calculations to be made on the variables selected and entered by the user. Certain products will be marked as promoted, featured or sponsored and may appear prominently in tables regardless of their attributes. All products will list the LVR with the product and price list which is clearly published on the product supplier’s website. Monthly repayments, once the basic criteria are modified by the user, will be based on the advertised prices of the selected products and determined by the loan amount, the repayment type, the loan term and the LVR as entered by the user. user/you. *The comparison rate is based on a loan of $150,000 over 25 years. Please note: this comparison rate is only true for this example and may not include all fees and charges. Different terms, fees or other loan amounts may result in a different comparison rate. Rates correct as of October 8, 2022. See disclaimer.

“Responsible Lending Laws were designed to end the reckless lending we have witnessed throughout the global financial crisis and the Royal Commission,” said Karen Cox, Managing Director (CEO) of Financial Rights Legal Center.

“It is incredible that less than two years after the royal commission made its first recommendation, the government wants to oppose it directly.

“Before the introduction of security laws, lenders routinely sold unaffordable loans to people, including pensioners, people receiving Centrelink payments and casual workers, who they knew would never be able to repay the loans. .”

Following the Royal Commission and the ASIC case against Westpac Shiraz, banks and Reserve Bank (RBA) Governor Philip Lowe expressed concern that lenders had become too conservative in their lending and the credit flow was too slow.

Australian Banking Association CEO Anna Bligh said the reforms would be a positive step for Australia’s economy.

“Government changes will simplify the system while preserving protections and ensuring customers still have the right to have complaints resolved by the AFCA [Australian Financial Complaints Authority]“said Ms Bligh.

“A simpler system means a faster and less complicated process for customers.”

Australians exposed to ‘terrible lending practices’

Fiona Guthrie, CEO of Financial Counseling Australia, said many people are struggling financially right now and the last thing they need is to take on more debt.

“We implore the Senate to heed the warnings of financial advisors, because our only interest is that of our clients,” Ms Guthrie said.

“We cannot in good conscience sit back and let these laws pass without doing what we can to stop them.

“Even with current responsible lending laws, financial advisers still see too many vulnerable people with too much debt. We despair that it will get worse.

The organizations said the open letter is backed by a new national poll which found 79% of people believe banks should always be required to check a customer’s ability to repay before offering a mortgage.

Gerard Brody, CEO of the Consumer Action Law Centre, said under the reforms borrowers would have the right to sue their lender for unsuitable loans removed.

“Lenders would also have much less incentive to adhere to good lending standards, as penalties for breaking laws are removed and weakened,” Brody said.

“A poll recently released in November 2020 shows that 82% of people think there should be fair compensation for people harmed by financial institutions.

“The government’s plan puts that at risk.”


The whole market has not been taken into account in the selection of the above products. Instead, a reduced portion of the market was considered. Products from some vendors may not be available in all states. To be considered, the product and price must be clearly published on the product supplier’s website. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au and Performance Drive are part of the Savings Media group. In the interest of full disclosure, Savings Media Group is associated with Firstmac Group. To learn how Savings Media Group handles potential conflicts of interest, as well as how we are paid, please visit the website links at the bottom of this page.

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