After the Government proposed scrapping safe lending laws, 125 organisations have joined in opposition to protect the rules that prevent consumers from gaining loans they are unable to repay.
In an open letter, the group urged Senators to block proposed weakening of safe lending laws which protect consumers from aggressive lending by financial institutions.
Supporters of the open letter include the Australian Council of Trade Unions (ACTU), the Australian Council of Social Service (ACOSS), Anglicare, and a range of religious, community, legal and family violence organisations from across Australia.
The letter had support from national polling as 79% of people thought banks should be required to always check a customer’s ability to repay before offering a mortgage, while only 4% disagreed.
The proposal to scrap the rule had support from the Customer Owned Banking Association (COBA) and Master Builders Australia who argued it would allow consumers to gain credit more easily.
Karen Cox, Financial Rights Legal Centre chief executive, said: “Responsible lending laws were designed to stop the reckless lending we witnessed throughout the Global Financial Crisis and the Royal Commission. It’s beyond belief that less than two years after the royal commission made this its first recommendation that the Government wants to go directly against it.”
Alan Kirkland, Choice chief executive said: “We have seen what happens when banks are unregulated, with no penalties for bad behaviour. That’s why we had to have a royal commission. Nobody wants to go back to those days.
“Vital organisations that assist millions of Australians have joined together to oppose these changes to lending laws. From community groups to domestic violence services and frontline legal assistance organisations, we know that removing these laws will hurt people.”
Fiona Guthrie, Financial Counselling Australia chief executive, said: “We implore the Senate to listen to the warnings of financial counsellors, because our only interest is that of our client’s. We cannot in good conscience sit by and let these laws go through without doing what we can to stop them. That’s also why financial counsellors from around Australia are writing to their local politicians asking to meet.”
Gerard Brody, Consumer Action Law Centre chief executive, said: “Under the government’s plans, borrowers would have existing rights to sue their lender for unsuitable lending removed. Lenders would also have far fewer incentives to comply with good lending standards, because penalties for breaching laws are being removed and weakened.”