The Federal Government have announced significant changes to the responsible lending laws designed to free up credit and get trade moving again. These changes should result in substantially improved outcomes for Dealers with small businesses and consumers now more easily able to obtain credit to purchase cars.
The reforms will be introduced through changes to the Credit Regulations and are scheduled to occur from 1 April 2021. Stakeholder consultations will be scheduled prior to the changes being finalised.
The key points of the reforms are as follows:
- These are the most significant reforms to Australia’s credit framework in a decade and will increase the flow of credit to households and businesses, reduce red tape and safeguard consumer protections.
- The changes will reduce the cost and time it takes for consumers and businesses to access credit.
- Billions of dollars in new credit will be extended to households and businesses in Australia each month.
- The Government will simplify the system by moving away from a “one size fits all” approach while at the same time strengthening consumer protections for those that need it.
- These changes will make it easier for the majority of Australians and small businesses to access credit, reduce red tape, improve competition, and ensure that the strongest consumer protections are targeted at the most vulnerable Australians.
- In the era of COVID-19, it is critical that unnecessary barriers to accessing credit are removed so that consumers can continue to spend and businesses can invest and create jobs.
- Maintaining the free flow of credit through the economy is critical to Australia’s economic recovery plan.
The AADA has been urging the Government to review consumer credit laws, which many members have complained are too restrictive. The AADA Pre-Budget submission argued strongly for this in Section 6, which called on the Government to review responsible lending laws. It is commendable that the Government have recognised the constraints on trade that the Responsible Lending Obligations (RLO’s) have caused and introduced changes critical to a post-pandemic economic recovery.
The changes also include reforms of the laws around Small Amount Credit Contracts (SACC’s) and consumer leases, designed to better protect consumers of these products.
Further details are available for download on the Treasury’s website.
A copy of the AADA Media Release is available on AADA’s website.