Labor ‘won’t be revisiting RLOs’: Assistant Treasurer

The Assistant Treasurer and Minister for Financial Services, Stephen Jones MP (member for Whitlam), has confirmed that the federal government will not be moving to repeal responsible lending laws.

Speaking at the Responsible Lending and Borrowing Summit in Sydney on Tuesday (12 July), Mr Jones highlighted that the party had been “gobsmacked” when the Morrison government had moved to amend the credit laws so that they removed responsible lending obligations (RLOs), among other changes.

The chief intention of the removal of the RLOs, as set out by the former federal government, was to reduce the time it takes for individuals and small businesses to access credit and streamline lending regulation. 

The bill, which never passed Senate, was met with strong criticism from consumer groups and members of both the Labor and Greens parties at the time, which expressed concern that repealing the laws would increase mortgage stress and erode consumer protections.

Mr Jones highlighted that the laws had originally been brought in by the former Labor prime minister Kevin Rudd and Treasurer Wayne Swan following the global financial crisis, stating: “Public and investor concerns at the time revolved around so-called ‘low and no-doc loans’, which applied no due diligence to loan applications.

“Labor’s RLOs restored confidence in the national mortgage book, maintained the flow of credit into the economy and helped us to avoid the recession that so many had predicted.”

The Assistant Treasurer told delegates that the Labor Party had welcomed the fact that commissioner Kenneth Hayne had recommended (in his final report for the banking royal commission) that the National Credit Act should not be amended to alter the obligation to assess unsuitability.

“We welcomed the fact that… the banking royal commission reviewed the operation of the RLOs,” Mr Jones said.

“And we were not surprised that Commissioner Hayne recommended they be left as they were – intact…

“So we were gob-smacked when the previous government went against that recommendation and attempted to lift those obligations on banks.

“I am glad to say we were able to defeat those attempts in Opposition.

“So we won’t be revisiting RLOs in Government.”

How to improve credit regulation

The financial services minister went on to confirm that the party would, however, be looking at how to “improve the regulation of credit in Australia”, including whether this should encompass the buy now, pay later (BNPL) industry.

“Australian consumers now have a plethora of credit products to choose from, which is a benefit to everyone confronting the current inflation spike,” he said.

“And within this classification of ‘credit products’ I include BNPL.

“This should not be controversial. If it walks like a duck and quacks like a duck, it’s a duck.

“So let’s have an end to the silly argument about whether BNPL is credit and get on with the next stage of growth for this emerging industry.”

The Assistant Treasurer said he would soon be consulting on options with key stakeholders, including industry, consumer groups and regulators on how to improve the regulation of credit.

However, he refrained from suggesting whether this should include regulating BNPL, specifically.

“BNPL products are unique and any future regulatory framework needs to reflect that,” he said, “which is why we will take a careful and deliberate approach that balances the need to protect consumers with encouraging innovation in our financial services industry.

“BNPL plays an important role in providing low cost and convenient credit to consumers.

“However, we must be mindful of the risks that may arise from innovation and ensure our regulatory frameworks remain fit for purpose in light of evolving technologies and business practices.

“We are carefully monitoring how other jurisdictions are approaching regulation.

“This includes the UK, which has also announced its intention to regulate BNPL as credit products, in a tailored way.”

In conclusion, Mr Jones said that “a well-functioning economy is built on the back of strong consumer protections and safe, well-regulated credit and financial products”.

“Our current responsible lending laws achieve an appropriate balance between facilitating access to credit and protecting consumers – particularly in the current environment of rising interest rates and costs of living,” he told the delegates of the Responsible Lending and Borrowing Summit.

“New and innovative products have the potential to improve outcomes for consumers and businesses. But we can’t be blind to the risks they present and must act to ensure regulatory frameworks remain fit for purpose.

“We need to ensure that vulnerable groups can access Australia’s credit and financial product markets. For this to occur, access to credit must go hand-in-hand with access to meaningful protections and remedies.

“We will play our part by holding to our election commitment to strengthen consumer protections.”

[Related: ‘No sustainable argument’ for RLO repeal: Donahoo]