Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697636230225.pdf (Australia)
5 February 2021 Senate Standing Committee on Economics PO Box 6100 Parliament House Canberra ACT 2600 Dear Senator Brockman, Thank you for your invitation to submit a response to the inquiry for the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020.

For more than 162 years, Bendigo and Adelaide Bank has sought to feed into the prosperity of its customers and communities, not off it.

As a bank, we aim to ensure our customers have timely access to credit.
This helps to drive opportunities for economic growth, while empowering Australians to fulfil their aspirations.

Bendigo and Adelaide Bank welcomes the proposed reforms.

We expect the changes will benefit our customers by streamlining the application process, while retaining important customer protections.

We are confident the reforms will modernise the regulatory landscape, assisting financial institutions to provide credit in a timely manner and simplify regulator interaction.
Australia’s banking regulatory frameworks are complex and this can slow the flow of credit to both individuals and businesses.

Furthermore, the weight of regulation falls heaviest on mid-tier banks like our own, as our size and structure make complying with existing provisions more onerous.
These changes can support the nation’s recovery from the social and economic impacts of the global pandemic (and the other preceding natural disasters), ensuring regulation doesn’t stifle investment and opportunity at a time when it is needed.

Our submission will address reducing regulatory and legal complexity, improving regulatory harmonisation, improving customer experience and maintaining customer protections.
It will comment on how current laws and regulations do not serve the purpose they were intended for.

We ask you to please consider the following submission and our final comments when assessing this bill.

National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020Submission 109 1.

Reducing regulatory and legal complexity Banks are subject to a legal and regulatory environment characterised by numerous actors, principles and legislative instruments.
Over time a combination of court decisions, evolution of regulatory guidance and industry best practices, has led to regulatory burden for credit providers beyond the scope of what was originally intended by the law.

This can contribute to excessive risk aversion and conservatism and a poor customer experience for consumers — all without evidence that customers are commensurately more protected.

Bendigo and Adelaide Bank welcomes a reduction in legal and regulatory complexity.
We acknowledge the important role different regulators play in the Australian banking system.

Lending activity is subject to scrutiny by several agencies and bodies, including APRA, ASIC, AFCA and the BCCC.

However, the scope and activities of the agencies overlap, requiring banks to adhere to the agency with the most restrictive approach.

The result is an approach to lending that is necessarily conservative to encapsulate the various principles of Australia’s regulatory environment.
Banks’ credit decisions and processes are not just subject to laws and principles at the time of decision making, they can also be subject to oversight in hindsight.

This can arise, for example, when external dispute resolution frameworks lead to bank decisions being challenged, including with regards to concepts such as fairness.
While banks may make a decision based on the regulatory guidance at the time, the decision continues to be subject to a retrospective review applying the standards that are applicable at that time.

This adds an unnecessary layer of confusion and complexity for banks seeking to do the right thing by their customers.

These proposed reforms present the opportunity to clear up some of the interaction and cross-over of scope, operations and rules administered by regulators.
This will lead to a more efficient flow of credit, where appropriate, leading to support for economic growth through Australia’s COVID-19 recovery and beyond.

2.

Enhancing the customer experience These reforms will provide an opportunity for ADIs to reconsider their lending processes to improve customer experience.

In applying for credit today, some customers will be subject to a very granular expense verification processes that seems unnecessary and can cause frustration.
Historical expenditure is scrutinised because it is readily available, however, experience suggests it is a customer’s future financial circumstances that will determine their ability to repay their loan.

Reshaping the responsible lending obligations will enable greater emphasis to be placed on this.

Thus, reducing the need for granular expense scrutiny, which can be an inefficient process for both customers and lenders.

3.
3.

Maintaining customer protections If responsible lending obligations are altered, critical customer protections need to continue.

In practice, responsible lending obligations are minimum standards and banks have developed their own lending policies and procedures to ensure their customers are appropriately protected.
2 National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020Submission 109 These practices are what financial institutions use as the basis for educating their staff.

Changes to responsible lending provisions will not affect the obligation banks have to protect customers.

It is worth noting the changes proposed by the government to responsible lending provisions will not apply to small amount credit contracts.
We support this as the measure will protect customers from “pay day lenders” that lack the policy sophistication and infrastructure of licensed banks.

3.1 Development and support of financial literacy We should be continually striving to improve financial literacy.

Just over half of all Australians are financially literate (Preston, 2020).
Strong financial literacy is an important foundation for building personal wealth and prosperity, as well as empowering consumers to make decisions in their own best financial interests.

We also believe it is an important tool in maintaining customer protections.

Protecting consumers from predatory, unscrupulous or inappropriate lending is vital.

Regulation is a powerful way to do this, however it is not the only policy lever available to government.
We note ASIC’s Moneysmart initiative has had strong usage in the past year and that this is an important step forward in building financial literacy.

Although, we believe improving financial literacy is still an underutilised option in the government’s policy mix.

Similarly, language and guidance used by regulatory bodies should be easier to understand and more accessible for all constituents.
Consideration should be given to minimising the use of legal and financial jargon, as well as promoting the needs of specific groups such as people living with a disability and people from non-English speaking backgrounds.

This would empower customers to better understand and/or locate information that is relevant to them and help them achieve their financial goals.

4.
4.

Final comments Given Australia’s prevailing economic environment, the proposed reforms appear to be a better balance of the interests of all parties and address Australia’s current economic and financial policy needs.

The reforms will provide Australians with the opportunity to access a more timely and efficient flow of credit, while maintaining appropriate consumer protections.
We believe diligent banking and organisational alignment to our customers’ values and best interests will lead to appropriate assessment of a customer’s credit application.

Furthermore, a prudent and responsible approach to lending is in the banks interest as well as the customer’s interest.

These reforms offer an opportunity to address regulatory complexity and ambiguity, which can contribute to unnecessary risk aversion and conservatism among lenders.
We welcome the removal of a “one size fits all” approach to credit assessment that will see consumers and businesses with strong credit profiles having better access to credit.

3 National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020Submission 109 National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020Submission 109