In the lead-up to bringing down the budget on 6 October, the Federal Treasurer, Josh Frydenberg, made a number of announcements, which is standard procedure. Announcing snippets of what’s to come keeps media busy and builds anticipation ahead of the big release. Amongst the raft of changes, support programs and expenditure announcements was one that impacts the boat loan sector and has attracted a lot of attention. That is in regard to the Treasurer’s proposed changes to simplify the credit framework in Australia.
While much of the talk around the changes is about home mortgages and loans for small business, the reforms may impact all types of consumer credit including boat loans. Not surprisingly, Jade Boat Loans existing and new customers may be wondering how these changes will affect their boat loan. Despite not much detail currently being released, we have put together this explainer as an overview of the proposed changes and potential impacts.
Proposed Credit Changes: Overview
The focus of the 2020/21 budget, which was deferred from May to October, is clearly on stimulating the economy and boosting the COVID-19 recovery. According to statements from the Treasurer, the Governments sees the free flow of credit as critical to that recovery. Against a backdrop of what the Treasurer stated was the burden of increasing regulation, the Government has announced its plan to reduce both the time taken to access credit and the costs of obtaining credit for both businesses and consumers. Proposing quite major reforms to the way credit flows.
The current situation sees credit licensees – banks, other lenders and brokers like Jade Boat Loans, regulated by ASIC and in regard to consumer finance, adhering to the strict Responsible Lender Guidelines. We covered the ASIC requirements in detail in an article which is available for you to read in our articles web section.
In addition, the banks also need to meet the regulations under APRA, the Australian Prudential Regulatory Authority. There is duplication seen across the current framework which the Treasurer’s proposed changes seeks to address.
The current framework places the onus heavily on the lender in regard to responsibility. Some see the current laws as taking too long to approve loans while the lenders meet these strict requirements and in some instances are checking and verifying every financial spending entry on an application. This is seen as particular relevant to home mortgages.
The proposed changes cover a number of areas but key to the boat loan area is the shift in responsibility from the lender and more to the borrower. Those applying for credit will be responsible for the provision of accurate information an details in regard to their capability to repay any loan they are seeking. Lenders will be permitted to place greater reliance on the information as provided to them. This is seen as changes that will provide a faster flow.
But despite any changes, there will still be consumer protection laws in place to safeguard consumers.
If you would like to personally study the proposed consumer credit reforms you can access the Fact Sheet at https://ministers.treasury.gov.au/sites/ministers.treasury.gov.au/files/2020-09/Consumer-credit-reforms-fact-sheet.pdf
Schedule for Implementation
While the Treasurer has announced these credit reforms, there is quite a process to be undertaken before they can be implemented and come into effect. The Government has indicated that stakeholder consultation will be undertaken in formulating the legislation.
The legislation then needs to be drafted and brought to the Parliament. Both the Senate and House of Reps need to pass the legislation. As we have seen on many occasions when a Government does not have a majority of Senate seats, there can be extensive negotiations with crossbench senators before legislation is finalised and passed. Amendments are often made during that process.
The Treasurer has stated the reforms are planned to come into effect on 1 April 2021.
Impact on Your Boat Loan
- As mentioned, these credit reforms are proposals only at this stage and not planned to come into effect, if passed by Parliament, until April 2021.
- For existing boat loan customers, any changes implemented by these reforms will not affect boat loans which have already been put in place.
- If you are currently in the process of applying for a secured boat loan or your Jade Boat Loans application is currently being processed or finalised, these proposed changes will not affect your boat loan.
- If you have received a boat loan quote from Jade Boat Loans and are yet to make a decision on proceeding, these reforms will not affect the quote or your application process.
- The changes proposed are designed to ensure an easier and more streamlined flow of credit and as such will impact new credit applications from that time only. Existing loans will not change.
Proceeding With Your Boat Loan
Jade Boat Loans strives to provide a streamlined and fast boat loan process for all applications. You can access a quick quote and a fast boat loan approval and your consultant can assist with the paperwork and liaise with the boat seller to ensure prompt loan settlement and finalisation of your purchase.
If you have any questions about the proposed credit law reforms or you would like to proceed with your boat loan please contact Jade Boat Loans 1300 000 003
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