Changes to consumer lending laws are a step closer to being passed into law but still face the hurdle of being passed by the Senate. As this issue is likely to get a lot of media attention in the lead-up to the crucial vote, we cover off on what is involved and what the changes may mean to your bike loan application.
First, roll back to 2020 and the Federal Government’s response to the economic impacts of the COVID-19 pandemic. The Treasurer, Josh Frydenberg, identified the more efficient flow of credit as a way to stimulate the economy. This was primarily focussed on loans to small businesses and home loans but as the National Consumer Credit Protection Act (2009) covers most types of consumer loans, it would include motorbike loans.
The existing laws around how lenders assess loan applications were seen as complex and overly time-consuming and in the case of some loans, increasing the costs involved. Some processes were seen as being duplicated. Specifically, around how discretionary spending is assessed by lenders. As a licensed credit provider, Jade Bike Loans must adhere to the law in assessing motorbike loan applications.
The changes to the laws, in basic principles, move the onus from the lender to prove the applicant can meet their loan commitments more to the applicant to take that responsibility.
Making the Change
The process involved in changing such laws involves a number of Federal Parliamentary stages which have been ongoing over recent months and on 12 March 2021 reached the final stages. The Treasurer presented the Bill to change the laws to the ‘House’ (Parliament) in 2020 and that signalled the start of the consultative process by a Senate Committee.
The Senate Committee has been holding hearings to receive and consider submissions from stakeholders including banking and lending industry bodies and consumer advocate groups amongst others.
While not a unanimous decision with Labor and Greens Senators dissenting, the Senate Economics Legislation Committee handed its report down on 12 March 2021 with the recommendation that the Bill entitled “National Consumer Credit Protection Amendment (Supporting Economic Recovery Bill 2020” to be passed with no significant changes.
One of the submissions which some have noted of significance in this decision was that of the Australian Banking Association which noted that the reforms meant less paperwork and less time in applications for the borrowers while lenders would not conduct less scrutiny of applications.
The next stage of the process is the debate in the Senate itself. While the coalition Government holds the balance of power and hence the votes for their Bills in the House of Representatives, it does not hold the balance of power in the Senate. So it will come down to securing support from sufficient of cross-benchers for the reforms to pass into law. The Treasurer originally slated 1 April 2021 for these changes to become law.
The next few weeks will hold the key and many will be keenly watching to see how the legislative process plays out.
What this means to motorbike loan applicants
The importance to our Jade Motorbike Loans customers is clear – what does this all mean for me? We offer fast approvals and prompt settlement of loan applications already, so how could this change how we handle your loan application?
If adopted, it should result in less detail having to be included in a loan application form which will mean less time and effort for the applicant. As the Banking Association mentioned in their submission, currently there is a focus and reliance on an assessment of the discretionary spending behaviour of the applicant. They see the reforms as changing that to focus on the income and the debt levels of applications.
So what is discretionary spending? That’s how you spend your money after you’ve paid your necessary and essential living costs. The argument ‘for’ the change is primarily focussed on that borrowers can and do change their lifestyle and spending habits, where necessary, to repay new loans. For example, your current discretionary spending may include several nights a week out for dinner with friends with a big tab. If you took on a motorbike loan, you could easily adjust those plans to say just 1-2 nights out at a less expensive venue so you had more money to cover your bike repayments.
As a licensed credit provider and responsible lender, Jade Bike Loans adheres to the consumer laws which is why our consultants must request a range of details and information in the motorcycle loan application process.
Moving Forward
If you have recently submitted a motorbike loan application through Jade Bike Loans, your application will be assessed under the existing Consumer Credit Laws. Any applications made after any reforms are introduced will be assessed by our lenders based on the new framework.
While our consultants work hard to ensure fast approvals, if you are looking to secure a loan for say an upcoming limited edition bike or you’re starting the selection process, we highly recommend a pre-approved motorcycle loan. This involves commencing the application process prior to making a final purchase decision.
We’re staying across developments and will be posting updates when any reforms to consumer laws which affect our customers are introduced.
To discuss applying for a motorcycle loan call Jade Bike Loans at 1300 000 003
DISCLAIMER: IN REGARD TO ANY ERRORS OR MISREPRESENTATIONS IN THIS MATERIAL, NO LIABILITY IS ACCEPTED. THE DETAILS, CONTENT AND DATA ARE PRESENTED PURELY FOR GENERAL INFORMATIONAL PURPOSES FOR MOTORBIKE BUYERS AND THOSE SEEKING MOTORCYCLE LOANS. THIS IS NOT INENDED AS THE SOLE SOURCE OF INFORMATION FOR FINANCIAL DECISIONS. IF SPECIFIC ADVICE IS REQUIRED AROUND FINANCIAL DECISIONS, READERS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.
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