If you are considering a loan to purchase a new boat, you may be interested to know how the proposed reforms to existing consumer laws around lending are progressing and if passed, how they may impact your loan application. You may have heard mention of these proposed changes over the past year as they have been working their way through the various stages of the Federal Parliament legislative process. We can now bring you an update on the consumer credit reforms and how they may impact you, as they have reached a critical stage.
As a recap, in September 2020, Treasurer Josh Frydenberg announced a range of changes to aspects of the National Consumer Credit Protection Act (2009) as part of the Government’s economic stimulus measures. The purpose was to simplify the process for borrowers to achieve loans and increase and speed up the flow of credit to stimulate the economy. While the proposed changes highlighted issues particularly in home mortgages and loans to small business, these laws encompass many areas of consumer credit including boat loans.
As a licensed credit provider, Jade Boat Loans operates to meet the Responsible Lender Guidelines and adheres to the requirements as set out in the consumer laws when assessing and processing boat loan applications.
The perceived problem as highlighted by the Treasurer in announcing the reforms package revolved around the existing obligations of responsible lenders to adhere to essentially a one size fits all framework to lending. The reforms would allow lenders greater flexibility in assessing applications. The obligation in many respects would shift more to the borrower and allow the lender to adopt a risk-based approach.
The existing credit laws were seen as applications taking too long to be assessed and approved, the application process overly complex with extensive duplication in the process. The reforms aimed to streamline and simplify the process.
The Change Process
The process of changing Federal laws involves several stages. Laws need to be passed by both houses – Representatives and the Senate – following the prescribed consultative and committee stages. With the coalition Government not holding the balance of power in the Senate, the passing of laws can be a complex process of negotiating with the cross-bench senators.
In this instance, the Senate Economics Legislation Committee consultative process was carried out in late 2020 with submissions received and considered by both supporters and detractors of the proposed changes. The Australian Banking Association and other lender bodies supported the changes while several consumer advocacy groups were against the changes.
The process has now reached the stage of the Committee submitting its report in support of the reforms on 12 March 2021. The process now enters the stage of debate in the Senate as the date for introducing the reforms, 1 April 2021, approaches.
If you follow the legislative and political arena, you will no doubt hear updates and speeches delivered in the Senate. If that’s not your area of interest, don’t worry, the team at Jade Boat Loans will be staying across progress and providing more information via our blogs when final decisions are reached.
Impact on Boat Loan Applications
The significance to our boat loan customers is in how your application is currently assessed and processed and how that may change if the reforms are introduced into law. Hopefully this explainer has clarified why our Jade consultants are required to request certain information and details around your expenses as part of your application.
Under current laws, lenders are required to assess a person’s habits in regard to ‘discretionary spending’. That’s how you spend your money. Under the proposed changes, that assessment will be focused more on income/debts. Worth mentioning, that in their submission to the committee the Banking Association stated that people’s spending behaviour could be amended when they took on new loans. In simple terms, people could and do cut back on non-essentials to cover loans for things they want such as homes and boats!
While Jade Boat Loans has always offered fast loan approvals and prompt service, the reforms have the potential to speed up that process and particularly provide loan applicants with a less cumbersome boat loan application process. A process which we must adhere to under the law.
If you already have a boat loan application being processed, any changes to credit laws which may be implemented after the proposed introduction date of 1 April 2021, will not impact your current application.
If you apply for a boat loan after any reforms are introduced, your loan may be processed faster. But lenders will always abide by the law and individual lenders will still have their own guidelines around loan approvals.
Engaging Jade Boat Loans to source your loan can be a very smart move, with or without these changes. Your consultant handles much of the loan paperwork for you as well as sourcing and negotiating the cheapest loan offers.
We’ll post articles on further updates as these laws pass through the legislative process. If you have any questions about the impact of consumer credit laws on your proposed or existing boat loan application, please reach out to our team.
To discuss all and any aspects of applying for a boat loan, call Jade Boat Loans 1300 000 003
DISCLAIMER: THE INFORMATION AND SPECIFIC DETAILS CONTAINED IN THE CONTENT OF THIS ARTICLE HAVE BEEN PREPARED AND ARE PRESENTED PURELY AS GENERAL INFORMATION AND NOT INTENDED AS THE ONLY SOURCE OF FINANCIAL ADVICE FOR BOAT BUYERS AND LOAN BORROWERS. FOR THOSE THAT CONSIDER THEY REQUIRE SPECIFIC ADVICE, THEY SHOULD CONSULT WITH A FINANCIAL ADVISOR. LIABILITY IS NOT ACCEPTED IN REGARD TO ERRORS AND MISPRESENTED DATA AND DETAILS HEREIN.