The reforms to the consumer credit laws as proposed by the Treasurer, Josh Frydenberg in September 2020 are now into the final legislative phase. When first proposing the changes, the Treasurer indicated he would like to have the changes in place by 1 April 2021. The Bill, which covers changes to the National Consumer Credit Protection Act (2009) is due to be debated and voted on by the Senate very soon. This follows the extensive legislative process which has included the consultative period and consideration by the relevant Senate Committee.
As a licensed credit provider, Jade Caravan Finance adheres to the Responsible Lender Guidelines and is required to assess and process caravan finance applications as per the consumer credit laws. So many of our customers may be wondering how any changes to the consumer credit laws will affect their caravan loan. We’re taking this opportunity to update you on these changes to allay any concerns you may have around your existing or potential new loans.
The Reforms: Summary
When preparing and offering the extensive range of stimulus measures in response to the COVID-19 pandemic, the Treasurer identified the flow of credit as significant to economic recovery. Aspects of the existing consumer credit laws were seen as holding up the easy and timely flow of credit, particular in regard to small business loans and home loans. While these two areas were singled out for mention, the laws cover all areas of consumer credit including loans for caravans as offered by Jade Caravan Finance.
Specifically, the issues were around the complexity of the loan application process, the duplication of process at some stages and the time taken for loans to be assessed and approved. It was seen as the onus on the lenders to assess and as such prove to their satisfaction, that the applicant could meet any obligations of the loan being applied for. That assessment included discretionary spending behaviour.
The changes which have been proposed include a number of aspects, but overall, they move much of the responsibility to prove the ability to meet loan commitments from the lenders and onto the loan applicant.
In regard to discretionary spending for example, in their submission to the Senate Committee, the Australian Banking Association specifically mentioned that borrowers could and in many cases would be expected to, change their spending patterns in order to meet new loan commitments. The ABA proposing more emphasis on assessing debt/income rather than current spending patterns.
It has taken 6 months to get to this stage as the legislative process in the Australian Parliament can be quite involved and lengthy when new laws are being considered. In this case, the Senate Committee had submissions from a range of stakeholders including consumer advocacy groups and lending groups to consider and assess. Submissions were presented that both supported and opposed the reforms. The detractors’ key argument being that easing the flow of credit could place some consumers in a vulnerable position. In response to that point, the reforms are seen as maintaining protections for vulnerable consumers.
On 12 March 2021, the committee wrapped up its process and handed down the report which recommended the Bill be passed without significant alterations. The decision was not unanimous with Senators from the Labor Party and the Greens opposing the changes.
The next and final stage is for the law to be passed by the Senate. As the Coalition does not have enough seats/votes in the Senate, that is it doesn’t hold the balance of power, there is likely to be negotiations with cross bench senators.
If you keep an eye on Parliamentary news, you may hear reports around the progress of the Bill. You can access details to review the complete wording of the Bill through the Australian Parliament website.
Changes and Your Loan
First up, we want to assure our existing and potentially new caravan loan customers that Jade Caravan Finance adheres to all relevant laws around consumer lending and your individual interests and requirements are addressed with our personal broker-style lending service.
For those that already have caravan finance through Jade or any other lender, any changes made to the laws will not apply to your loan. Your loan term and repayments will not be affected by any changes.
For applicants with a caravan finance application currently being processed by Jade, it will be assessed based on the current consumer credit laws. If an application is submitted after any changes are made to the laws, the new laws would be applied. If prior to any changes, then the application would be assessed on the 2009 Act.
For those considering applying for low interest rate caravan finance at some time in the future, any changes may make the approval process somewhat faster. However Jade already offers an extremely streamlined finance approval and processing system to ensure our customers receive fast approvals and prompt settlements.
Our team stays across a range of economic and financial matters and will provide further updates as appropriate.
To apply for a caravan loan or pose any questions you may have around the loan application process, please call 1300 000 003 and speak with one of our Jade Caravan Finance consultants
DISCLAIMER: THE DETAILS AND INFORMATION IN THIS CONTENT ARE PREPARED AND PRESENTED PURELY FOR INFORMATION AND NOT INTENDED IN ANY WAY AS THE SOLE SOURCE OF FINANCIAL ADVICE FOR CARAVAN PURCHASING. IF ADDITIONAL FINANCIAL ADVICE IS REQUIRED, READERS SHOULD REFER TO A FINANCIAL ADVISOR. NO LIABILITY IS ACCEPTED FOR ANY ERRORS, PRODUCT DESCRIPTION VARIATIONS, OR OTHER MISREPRESENTATIONS OF INFORMATION AS PRESENTED.