The Federal Government is about to introduce new national consumer laws, which will include tougher penalties for dodgy lenders.
Chris Bowen Financial Services Minister has stated that the measure will make it less likely that families who can't meet their debts will lose their homes.
Mr. Bowen informed parliament that the measures will replace the present state-based system of consumer credit protection, which operates inconsistently across the eight jurisdictions.
He further added that as well as making the consumer credit system fairer, more consistent and more workable, the new structure will significantly improve the effectiveness of protection for consumers. It will also address any of the problems that have plagued the state system.
The Australian Securities and Investment Commission (ASIC) will run a national licensing system for everyone in consumer credit.
To qualify for a credit licence, lenders and brokers will need to meet training requirements, have adequate financial and staff resources, meet enhanced standards of conduct and be part of a dispute resolution scheme which borrowers can use without cost.
ASIC will have the power to cancel a licence, which will ban the person from engaging in credit activities anywhere in Australia.
Mr. Bowen stated that meeting responsible lending obligations would be a key licence condition.
It will be a future requirement that lenders and brokers have to make reasonable inquiries to assess a potential borrower's capacity to repay the loan. Borrowers needed to be made aware of their right to request a variation to their credit contract if they endured financial hardship.
Mr. Bowen stated that additional measures had been included to help protect consumers' family home by requiring more rigorous assessment of any credit offer that would require the consumer to sell their home in order to meet the obligations of that contract.
ASIC'S enforcement powers would be strengthened, with criminal penalties of up to two years jail for those breaching responsible lending requirements. Civil penalties for licence misconduct will be up to $220,000 for an individual and $1.1 million for a corporation.
Mr. Bowen stated borrowers could have disputes resolved quicker and cheaper through dispute resolution scheme.