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Proposed Changes to Credit Regulations

If you’re getting organised to buy a new motorcycle with a bike loan and heard the Treasurer’s recent statements about simplifying credit and thought ‘you beauty’ – not to dampen your enthusiasm or stop you at all, but they are not in law as yet. So if you’re about to apply for a bike loan now, the current regulations and credit laws will apply.

We explain what all the talk around easing credit is about so you have a fuller understanding of the situation.

In the last weeks of September, Josh Frydenberg, the Federal Treasurer, was doing the rounds of pre-budget announcements, as is the usual process. Normally the Treasurer brings down the budget in May in time for legislation to be passed (in theory) by the new financial year. But with the economic uncertainty and implications of COVID-19, the decision was made early in the year to delay the budget until October. That way, the Government could better frame the budget to suit the COVID-19 economic recovery.

In order to stimulate economic recovery, consumers need to spend and businesses need to invest. Both these actions usually require credit that is loans and finance. When buying a new bike, many people will need a motorcycle loan. The purchase supports the bike dealer’s business and so the wheels of the economy turn and grow.

In the lead-up to the budget, the Treasurer made a number of announcements, eluding to what is in the budget. The one that is attracting attention in the lending sector was around the simplifying of the credit framework in Australia.

The Treasurer said that in order to assist economic recovery, it was more important than usual for unnecessary barriers removed to enable the simpler and easier flow of credit to both consumers and to small businesses. This would include home mortgages and consumer loans for goods such as motorbikes.

To put this in context, lending restrictions were tightened in the past and it is considered in some sectors that it is taking too long for especially home mortgage applications and other loans to be approved. In addition, some have mentioned that lenders, especially banks, are spending too much time in questioning a lot of the expense/income figures in borrower’s applications. A process which is slowing down the flow of credit.

In addition, there is seen as duplication in some respects with the regulations under ASIC for responsible lending guidelines and the rulings that banks must adhere to under APRA, the Australian Prudential Regulatory Authority.

Proposed Changes

The details of the changes that are proposed have not as yet been released by the Treasurer and the Government has stated that a stakeholder consultation process will be followed in forming the final legislation.

However, in general, the overriding premise of the changes is a shift in responsibility from the lender to the borrower. Currently, the lender must perform a strict set of checks and processes when considering a credit application. Under the ASIC regulations Jade Bike Loans is not permitted to make an offer of a loan if that loan is deemed unsuitable to the borrower.

Under the new proposal, the responsibility shifts more to the borrower and the lender would be permitted to rely on borrower’s information as provided when assessing applications.

It will be up to the borrower to ensure they provide accurate details in regard to their ability to meet the loan obligations.

Consumer protection laws will still be in place to safeguard consumers and the lenders, including Jade Bike Loans as a credit licensee, will still have strict regulations and guidelines to adhere to.

While we await the detail and final shape of the legislation, you can read the current details at:-

https://ministers.treasury.gov.au/sites/ministers.treasury.gov.au/files/2020-09/Consumer-credit-reforms-fact-sheet.pdf

How this Affects Your Bike Loan

  • The proposed changes to simplify the flow of credit are at this stage only proposals. The Treasurer indicated he hoped these measures would be in place by 1 April 2021.
  • If you have a current bike loan, any changes to credit laws will not impact your loan.
  • If you are applying for a bike loan at the moment, your application will be processed according to the existing laws and regulations.
  • If the proposed changes are brought into law by the Parliament, only then and after the lenders have implemented the necessary amendments to their own processes, will any impact on future bike loans be felt.

Time Schedule

  • The process to bring these proposed changes into reality is quite involved. First the Government intends to include these measures in the budget in concept. There will then be a stakeholder consultation process to frame the detail of the legislation.
  • Once drafted, the legislation needs to be passed by both the House of Representatives and the Senate. The Government does not hold a majority in the Senate and usually needs to negotiate with the crossbench which may result in amendments to the legislation.
  • As mentioned above, the Treasurer’s timeframe is to have these simplified credit laws in place by April 2021.

No Need to Wait

If you want your bike loan NOW there’s no need to wait until April 2021. While Jade Bike Loans complies with its obligations and responsibilities under the ASIC regulations, we’re still in a position to offer a fast, streamlined bike loan service and deliver cheap interest rate loans.

For a quote on a motorcycle loan just contact Jade Bike Loans 1300 000 003 for a quick quote, fast approvals and prompt settlement.

DISCLAIMER: DATA, DETAILS AND INFORMATION IN REGARD TO POLICIES, GOVERNMENT PROGRAMS, PROPOSALS AND GOODS AND SERVICE ARE PRESENTED IN THIS ARTICLE FOR GENERAL INFORMATION PURPOSES ONLY. THIS INFORMATION IS, UNDER NO CIRCUMSTANCES, INTENDED AS THE SOLE SOURCE FOR MAKING FINANCIAL DECISIONS OR IS IT INTENDED AS FINANCIAL ADVICE. INDIVIDUALS SHOULD SEEK INDEPENDENT ADVICE IN REGARD TO THEIR PERSONAL FINANCIAL SITUATION. ALL INFORMATION HAS BEEN OBTAINED FROM REPUTABLE SOURCES AND IS PRESENTED AS GENERAL INFORMATION AND INTEREST. NO LIABILITY IS ACCEPTED FOR ERRORS OR MISINTERPRETATION OF INFORMATION AND DETAILS OF GOODS ETC AS PRESENTED.

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