Government Relaxes Responsible Lending Options
The government has announced a relaxing of responsible business lending obligations in order to ensure small businesses can access credit quickly and efficiently in the coming months.
As it stands, responsible lending obligations don't apply to lending predominantly for business purposes; however, for a loan to fall within this exclusion, a lender is required to undertake due diligence to confirm the money borrowed meets this test.
Now, the government is changing this by providing an exemption from responsible lending obligations for a period of six months. Credit lenders can extend these to their existing small business customers so long as:
- There is an existing borrowing relationship
- Some proportion of that credit is used for business purposes
The exemption will apply to new credit, credit limit increases and credit variations and restructures.
The government recognises that "The environment for small business has and continues to change due to rapidly-evolving challenges posed by the coronavirus".
The revision is intended to enable lenders to move quickly to support small businesses, at a time when prompt action has become more crucial than ever.
Credit providers regulated by APRA will remain subject to APRA's prudential standards while the exemption applies, and providers who subscribe to an industry code will remain obliged to abide by that code.
The Morrison Government has promised it will continue to work with the banking industry and the financial regulators to support Australian jobs and businesses moving ahead.
Source: Broker News