Customers will get faster access to bank loans under a Morrison government relaxation of responsible lending laws introduced after the global financial crisis.
Treasurer Josh Frydenberg on Friday defended the move, arguing it is crucial to free up credit as Australia navigates the coronavirus pandemic.
“Responsible lending has become restrictive lending,” he told reporters in Canberra.
He said banks were becoming risk-averse to the point where loans weren’t being granted over fears they would go bad.
“We need our banks to be extending credit,” Mr Frydenberg said.
Under the new rules, lenders will be able to rely on borrower-provided information unless there are reasonable grounds to suspect it is unreliable.
Borrowers will be made more accountable for providing accurate information to inform lending decisions, replacing the “lender beware” rules with a “borrower responsibility” principle.
Mr Frydenberg said consumers would no longer have to provide Netflix subscriptions, Uber Eats receipts or other unnecessary details to have credit card limits extended.
“We’re going to make it quicker to access credit, but while also keeping the consumer protections in place,” he said.
But Labor is concerned the proposal could tip the balance in favour of big banks and loan sharks.
“We put these protections in there to put a brake on the ‘sales culture’ and they are chucking it away,” Labor financial services spokesman Stephen Jones told AAP.
“We are deeply concerned.”
The bill is expected to be referred to a parliamentary inquiry.
Greens senator Nick McKim said the banking royal commission had shown a willingness to engage in unlawful and predatory lending.
“And what’s this government’s response? Instead of making the banks abide by the law, they’re changing the law to abide by the banks,” he said.
The changes respond to concerns banks were being too slow to approve loans, with the government arguing a raft of strong protections are in place to protect consumers.
Banks welcomed the announcement, while consumer advocates were critical of a return to a “buyer beware” mentality.
The new regime is slated to come into place from March, provided the changes to credit laws pass parliament.
The government is also strengthening protections around “payday loans” and consumer leases to stop them being offered to people who can’t afford them.
A “fit and proper person” test for debt management companies representing consumers in disputes with financial services firms will also be introduced.