RLO changes could boost turnaround times: Westpac

Westpac CEO Peter King appeared before the economics standing committee hearing during their ongoing Review of the Four Major Banks and other Financial Institutions on Thursday (15 April), where he was asked what impact the changes to the responsible lending obligations (RLO) would have on Westpac’s customers, including potential future customers.

The National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 focuses on amending the credit laws so that they remove RLOs and extend the best interests duty to more credit assistance providers, among other changes.

Mr King responded by stating that broadly, he predicted that there would be limited impact on borrowing capacity if the proposed changes and responsibility lending obligations materialise.

Mr King reasoned to the committee that the rules between the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) are “fairly aligned” and, as such, would have a “limited impact” on borrowing capacity.

Committee deputy chair and Labor member for Fenner Dr Andrew Leigh asked Mr King if he was aware of consumer groups opposing the RLO changes.

Mr King responded: “I’ve certainly met with those groups and yes, and for people that aren’t as financially literate in the economy, we do need to do proper assessments of their capacity.”

However, Mr King said the changes could provide an opportunity for Westpac to simplify its loan processes, and added that “we hope that that would see turnaround times improve”.

“From our perspective, we’ve probably got too many controls in our responsible lending piece, and we were after those in any case, but having one regulator that we’re dealing with rather than two, we think can improve the process,” he said.

Dr Leigh asked Mr King during the hearing if he has been “lobbying in favour of” the changes to the responsible lending obligations.

Mr King said that he has been providing feedback on responsible lending to both sides of Parliament, including the fact that the bank has to interact with two regulators (ASIC and APRA) around the obligations, and added that the rules are not always consistent.

“We highlighted that… when people are borrowing for personal houses and businesses and what are called mixed loans, they can get a bit confusing,” he said.

“We highlighted the speed of approval times and the impact to that of some of the processes that we’re asked to do.”

Dr Leigh then pointed out that it was one of the recommendations of the banking royal commission not to change or dilute responsible lending laws, and asked Mr King if he is concerned about the “blowback” against the way in which customers view the major banks if they are “seen to be lobbying against the first recommendation of the Hayne royal commission”.

Westpac group executive, financial crime, compliance and conduct, Les Vance, who also appeared before the committee with Mr King, responded to Dr Leigh’s query by stating that the royal commission report recommended that there would be no change to the current law under three components.

Explaining further, Mr Vance said: “The first was around enquiries, and the expectation that we would make reasonable enquiries and take reasonable steps to verify the [borrower's financial situation].

“We support the idea of verification, particularly around income and liabilities, and we’re supportive of any processes that make it more convenient and more robust to get that verification.

“Our view has consistently been… can we simplify the process of verification of particularly those two key elements that has been touched on around the ‘suitable versus not unsuitable’. He recommended retaining that sort of standard for the bank, and the balance between banker and customer.”

Mr Vance also said that the major bank supports retaining restrictions around unsolicited credit card offers.

In response, Dr Leigh concluded by stating that it is “pretty dangerous to pick and choose on your Hayne royal commission recommendation”.

[Related: Responsible lending debate postponed till May]

Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.

Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.