As is customary prior to the release of the Federal Budget, in the last weeks of September the Federal Treasurer, Josh Frydenberg, made a number of announcements around what the budget could be expected to include. One of these announcements in particular has attracted our attention and that of many others as it pertains to the consumer lending sector. The announcement was around reforms to consumer credit and involves a number of key measures.
For anyone considering taking out a caravan loan or who has existing caravan finance, you may be interested in an explanation of the announcement and what these reforms may mean to your caravan loan.
Changes Proposed
Early in the year as the coronavirus pandemic was having a huge impact on both the health of Australians and the economy, the Government made the decision to delay bringing down the annual Federal Budget from the usual May timing to October. It was considered that October would be a better time to assess the effect of the pandemic and what measures would be required to assist recover and stimulate growth. So not surprisingly the focus of the budget will be on economic recovery and especially on creating jobs.
In his announcement, the Treasurer stated that the Government considers the free flow of credit both to businesses and to consumers, as a major factor in driving economic growth. Consumers need access to credit in order to make those much-wanted purchases such as a new caravan or camper trailer. Businesses of all sizes rely heavily on credit for investment.
But it was identified that the tightening of lending over recent times was creating obstacles to accessing credit. The ‘burden of regulation’ could be a restrictor not a facilitator for recovery.
The Treasurer flagged a number of key elements of these reforms, which are designed to remove much of the duplication in the system and simplify the credit framework. Once introduced, these elements are intended to reduce the time spent in accessing credit and the costs faced by businesses and consumers in acquiring the credit needed.
While much of the discussion and basis for the reforms is around home mortgages and small businesses, any changes to consumer credit laws will apply to the way in which Jade Caravan Finance provides our range of finance broker services.
Under the current arrangements and laws, finance brokers such as Jade Caravan Finance along with all lenders such as banks, finance companies and other non-bank lenders are known as Credit Licensees and regulated by ASIC. We refer you to our article on ASIC regulations for more details.
But in addition to meeting ASIC regulations the banks must also adhere to APRA rules. There is duplication in this process.
Under the way credit is currently provided, the lender must bear the major responsibility and in so doing, delays have been identified in accessing credit as some lenders go through the rigorous checks and verifications.
The key change as outlined by the Treasurer is in shifting that responsibility from the lender to the borrower. The borrower is to take greater responsibility for providing accurate data on their application and the lender will be permitted to rely on the information, eg income and outgoings, as provided. The outcome is expected to be a freer flow of credit.
Although changes are planned, consumers will still be protected and safeguarded under consumer protection laws.
Moving Forward
While the announcement of these reforms was made in September 2020, the actual implementation is not scheduled until April 2021. Very little detail was provided in the initial announcement and the legislation needs to be drafted, following a process of stakeholder engagement and consultation.
Once drafted, the legislation also has to pass both Houses to be enacted into law.
- If you currently have a caravan loan there is nothing you need to do and no changes will occur to your loan as a result of these reforms.
- If your caravan loan is currently being processed by your Jade Caravan Finance consultant or you are awaiting a quote, there is also no action required on your part. Your current application and request for quote will proceed under the current credit arrangements.
- Only those that apply for caravan finance after the reforms have been implemented, currently expected in April 2021, will be subject to the revised arrangements.
At Jade Caravan Finance, we adhere to all our required obligations and we still manage to provide a streamlined and easy process for our customers. We can provide quick quotes and fast turnaround of loan applications if you need to finalise your purchase quickly and we assist with the paperwork to save you time and hassle.
Above all, with all our caravan finance deals we negotiate the cheapest caravan finance interest rates possible to ensure our customers receive the best finance offers.
If you would like more information on the proposed changes to credit or to discuss a caravan loan, speak with a Jade Caravan Finance consultant at 1300 000 003
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