Banking & Finance | Legal

Meeting regulator expectations for responsible lending

20 Dec 2018, by Amy Sarcevic

Since the commencement of the Royal Commission into banking misconduct in late 2017, the public’s gaze has been firmly fixated on the behavior of major lenders.

Now, more than ever, consumers are acutely conscious of their rights and of what constitutes appropriate practice. In such a climate, maintaining organisational integrity and compliance with Australia’s robust set of consumer protection laws has never been more important.

Despite this, a report released last week by consumer watchdog, the ACCC, has revealed some troubling findings, suggesting that a greater systemic focus on responsible lending is needed.

The “Residential Mortgage Price Inquiry” was commissioned by the Federal Government following the imposition of a major bank levy in mid-2017 – which required Australia’s top five lenders to pay a quarterly tax on the total of their liabilities.

The levy was, in part, to help alleviate the budget deficit, but also, to counterbalance and subsidise the systemic risk posed by each of the banks, due to the magnitude of their lending.

Given the potential adverse consequences of an abrupt market distortion (in terms of the wider economy), it was crucial that the costs were not passed directly onto consumers. As such, the ACCC monitored the prices of residential mortgages between 9 May 2017 – 30 June 2018, to ensure that banks were not recovering the costs of the levy in this way.

The watchdog found that, although there was no evidence of the prices of residential mortgages being altered during this price monitoring period, there was a distinct lack of price competition between the major lenders, as well as a lack of transparency in discretionary pricing – which was deterring consumers from shopping around to find a better deal.

It also observed a “synchronised” increase in variable interest rates – which it supposed was a coordinated response between the major banks to an interest-only benchmark imposed by APRA in March 2017.

In the wake of the report, Informa’s Responsible Lending & Borrowing Summit will take a candid look at the key learnings of the banking Royal Commission – and its related investigative work – to date.

A roundtable featuring representatives from Westpac and Mortgage Choice will discuss whether responsible lending is open to interpretation across the industry, despite clear expectations laid out by the regulator.

A debate, led by representatives from the Australian Banking Association and Herbert Smith Freehills, will also look at risk, culture and conduct and where exactly it leaves the consumer.

Featuring more than twenty high profile speakers, the event will showcase a balanced set of perspectives from regulators, financial institutions, law firms and industry analysts.

Learn more and register.

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