Government to impose tough new laws on consumer credit providers

The National Consumer Credit Protection Bill 2009 will simplify and standardise the regulation of consumer
credit, which until now has been regulated under a myriad of different State and Territory laws to the
detriment of consumers, according to Middletons’ Head of Banking & Financial Services, Jim Bulling.

Mr Bulling says, “The proposed national licensing scheme will ensure consumers benefit through the
introduction of a number of measures designed to improve and regulate the conduct of lenders and brokers
throughout the industry. Both lending and broking institutions, including the banks, generally recognise that
this new regime is designed to stop predatory lending practices by unscrupulous operators and will be of
benefit to the industry and their customers.”

The registration and licensing requirements under the Bill extend to any person who engages in credit
activity. In order to become registered, a person must apply to ASIC for registration by 31 December 2009.
Once registered, any person engaging in a credit activity must apply to ASIC for a licence by 30 June 2010.

“What you tend to see is a small group of financial advisers and lenders giving the
rest of the financial services industry a bad name. The introduction of a regime for responsible lending will
hopefully result in the removal of these players from the industry,” Mr Bulling said.

A significant development arising from the Bill is the responsible lending obligations that will apply to all
licence holders. This is a significant change to the law as there is no existing legislation that regulates
responsible lending.

While these obligations will offer protection to consumers, Mr Bulling added “Responsible lending obligations
may in fact increase the cost of credit and lead to a further reduction in credit availability for some
consumers. Also, it is not entirely clear how the discharging of the responsible lending obligations will be
shared between finance brokers and lenders.”

Another of the Government’s reform proposals, the Australian Consumer Law, is also set to have a
significant impact on the consumer credit environment.

“The proposed Australian Consumer Law will allow consumers to challenge unfair terms in standard form credit contracts. This reform also has the potential to drive up the cost of credit, as lenders make the necessary changes to their documentation and adjust to a landscape in which standard form contracts are subject to challenge”.

Reaction to the National Consumer Credit Protection Bill is being sought from the government by Friday, 22
May 2009 and consultation in relation to the Australian Consumer Law is continuing.