As sub-prime fears hit the world, Australia has reacted with recommendations to regulate the non-bank lending industry and mortgage brokers.
The House of Representatives economics committee report released yesterday recommends that the $165 billion non-bank lending industry be subject to strict new national regulations designed to stamp out predatory lending. Although the committee found our sub-prime was smaller and better regulated than the US, the inquiry found our laws were inadequate to discourage predatory lending practices.
A state-based code introduced in 1994 has not worked. One reason is that the code did not cover – and therefore protect – small business borrowers or individual investors who increasingly are talking out low-doc loans.
Under the lending overhaul lenders and mortgage brokers would be required to belong to an external dispute resolution scheme to deal with consumers’ complaints. They also recommend better statistics are kept on housing repossessions. The regulation of credit would be shifted from the states to the Federal Government. Predatory operators would be subject to ASIC sanctions and could lose their licence. The report is being considered by the Federal Government.