Customers will be promised faster access to loans under simpler rules that aim to free up credit and lift the economy by ending confusion over lending obligations for banks and finance companies.
Treasurer Josh Frydenberg will overhaul the laws governing mortgages, personal loans, credit cards and payday lending to streamline decisions on whether customers can afford the loans they seek.
The changes respond to growing concerns over court disputes and the duplication of regulators in home and personal lending, sparking fears that restrictive rules on credit would curb economic growth.
With the government preparing to unveil tax cuts and spending measures in the October 6 budget, the lending reforms are intended to improve access to credit from March next year if Parliament approves changes to the Credit Act.
“Maintaining the free flow of credit through the economy is critical to Australia’s economic recovery plan.”
The lending reform comes one day after sweeping changes to insolvency laws and a major speech in which Mr Frydenberg outlined a two-stage fiscal strategy that would keep significant spending in place to recover from recession.
“I expect Phase 1 to remain in place until the unemployment rate is comfortably back under six per cent,” he said.
The government will remove ASIC from those duties to end the duplication after the corporate regulator lost a Federal Court action against Westpac over home lending standards.
The objective is to replace a philosophy of “lender beware” with a “borrower responsibility” principle to make sure credit is available.
This will place a greater onus on customers to provide accurate information about their ability to repay a loan.
Mr Frydenberg is framing the changes as a way to address “excessive risk aversion” in banking and finance and to free up the flow of credit…