One Nation thwarts government plan to ditch responsible lending laws

One Nation appears to have torpedoed the government’s plans to ditch responsible lending laws after the party’s leader Pauline Hanson said it would leave Australians vulnerable to predatory banks.

After the government last year announced a rollback of laws that affect how banks assess customers for mortgages and personal loans, Senator Hanson on Wednesday said the government was telling the public to relax and “trust the big banks”.

Pauline Hanson said the government’s planned rollback would leave Australians vulnerable to predatory banking conduct.Credit:Alex Ellinghausen

“But I say millions of Australians should not be left vulnerable to predatory banking conduct,” Senator Hanson said in a statement.

With Labor opposed to the government’s plans, the Coalition needs support from three of five Senate crossbenchers to pass its bill. Independent Tasmanian Senator Jacqui Lambie is reportedly against the change, and South Australian independent Rex Patrick said he was unconvinced because lending data did not show the responsible lending rules had hurt borrowers.

“Whilst I accept that the changes would reduce bank red tape, I’m not prepared to allow vulnerable borrowers to be disadvantaged for the benefit of the banks,” Senator Patrick said.

With One Nation’s two votes now against, the government’s chances of passing the law appear nil unless some senators have a change of heart.

“The government is giving the big banks almost carte blanche and is allowing them to self-regulate using the banks’ own weak, self-serving code of conduct that doesn’t provide strong consumer protection or responsible lending provisions,” Senator Hanson said. It would “drag Australia back to the horror days,” she added.

Senator Hanson said the government ought to adjust Australian Securities and Investment Commission guidelines and regulations instead if it wanted to improve loan approvals.

The government’s plan to axe responsible lending laws was announced last year amid fears a deep recession caused by COVID-19 would make banks reluctant to lend, undermining the economic recovery.

Since then, however, the strength of the economic recovery has consistently beat economists’ expectations, and mortgage lending has surged in response to ultra-low interest rates and soaring house prices.

The government has argued the changes would lead to a more efficient flow of credit by reducing “red tape” but still include protections for vulnerable customers.

Banks, which are also regulated by the Australian Prudential Regulation Authority, argue they have no incentive to lend to customers who cannot afford the repayments and have strongly supported the rollback, saying it will speed up loan approvals.

Consumer groups say the rollback will strip away protections for bank customers, and risk adding more fuel to the booming property market.

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