From July 1st, ASIC formally took over the regulation of the Australian credit market with the Federal Government’s new legislation, the National Consumer Credit Protection (NCCP) bill, coming into effect for the first time.
This is a win for consumers generally, and seniors in particular. The centrepiece of the bill, ‘Responsible Lending’, now makes it an offence for a lender, bank or broker to recommend a loan or credit product that is unsuitable for the borrower. There is now a much higher onus on lenders and brokers to ‘know their client’ and ensure that any product selected is ‘not unsuitable’.
OUTCOME: This will better protect vulnerable consumers from unscrupulous lenders and brokers. In particular, those rogue operators who have in the past recommended ‘Low Doc’ or ‘No Doc’ loans for pensioners and the elderly – often with devastating effects – will now find it much harder. Consequently , it is highly likely that regulation will drive many such ‘fringe dwellers’ from the industry, thereby improving both the professional standards of the mortgage broking community, and the experiences that consumers have when seeking credit through such intermediaries.
Reverse mortgages will be subject to further specialist treatment under ‘Phase Two’ of regulation, from Jan 2011.
TIP: When dealing with a mortgage broker in future, you should check that they are registered with ASIC first.