Consumer lending: Direct lending
Recommendation 1.1 – The NCCP Act
The NCCP Act should not be amended to alter the obligation to assess unsuitability.
Consumer lending: Intermediated home lending
Recommendation 1.2 – Best interests duty
The law should be amended to provide that, when acting in connection with home lending, mortgage brokers must act in the best interests of the intending borrower. The obligation should be a civil penalty provision.
Recommendation 1.3 – Mortgage broker remuneration
The borrower, not the lender, should pay the mortgage broker a fee for acting in connection with home lending.
Changes in brokers’ remuneration should be made over a period of two or three years, by first prohibiting lenders from paying trail commission to mortgage brokers in respect of new loans, then prohibiting lenders from paying other commissions to mortgage brokers.
Recommendation 1.4 – Establishment of working group
A Treasury-led working group should be established to monitor and, if necessary, adjust the remuneration model referred to in Recommendation 1.3, and any fee that lenders should be required to charge to achieve a level playing field, in response to market changes.
Recommendation 1.5 – Mortgage brokers as financial advisers
After a sufficient period of transition, mortgage brokers should be subject to and regulated by the law that applies to entities providing financial product advice to retail clients.
Recommendation 1.6 – Misconduct by mortgage brokers
ACL holders should:
Consumer lending: Intermediated lending for vehicles and other consumer goods
Recommendation 1.7 – Removal of point-of-sale exemption
The exemption of retail dealers from the operation of the NCCP Act should be abolished.
Recommendation 1.8 – Amending the Banking Code
The ABA should amend the Banking Code to provide that:
to identify a suitable way for those customers to access and undertake their banking;
Lending to small and medium enterprises
Recommendation 1.9 – No extension of the NCCP Act
The NCCP Act should not be amended to extend its operation to lending to small businesses.
Recommendation 1.10 – Definition of ‘small business’
The ABA should amend the definition of ‘small business’ in the Banking Code so that the Code applies to any business or group employing fewer than 100 full-time equivalent employees, where the loan applied for is less than $5 million.
Recommendation 1.11 – Farm debt mediation
A national scheme of farm debt mediation should be enacted.
Recommendation 1.12 – Valuations of land
APRA should amend Prudential Standard APS 220 to:
Recommendation 1.13 – Charging default interest
The ABA should amend the Banking Code to provide that, while a declaration remains in force, banks will not charge default interest on loans secured by agricultural land in an area declared to be affected by drought or other natural disaster.
Recommendation 1.14 – Distressed agricultural loans
When dealing with distressed agricultural loans, banks should:
Enforceability of industry codes
Recommendation 1.15 – Enforceable code provisions
The law should be amended to provide:
Recommendation 1.16 – 2019 Banking Code
In respect of the Banking Code that ASIC approved in 2018, the ABA and ASIC should take all necessary steps to have the provisions that govern the terms of the contract made or to be made between the bank and the customer or guarantor designated as ‘enforceable code provisions’.
Processing and administrative errors
Recommendation 1.17 – BEAR product responsibility
After appropriate consultation, APRA should determine for the purposes of section 37BA(2)(b) of the Banking Act, a responsibility, within each ADI subject to the BEAR, for all steps in the design, delivery and maintenance of all products offered to customers by the ADI and any necessary remediation of customers in respect of any of those products.