Fintechs back lending reforms but banks need to be aware of "buyer beware "
The government’s decision to relax the lending criteria has been backed by a number of fintechs and neo lenders but one warned a cautious approach is still needed.
"We are very pleased with the decision from the government to change the responsible lending law. It clearly shows they are actively thinking about this sector and we agree this will provide consumers with more choice, and encourage them to seek out a better deal by reducing the barriers in switching credit providers,” Wisr CEO Anthony Nantes said.
But while Nantes is eager to see what the responsible lending law changes will bring to the sector, he emphasised Wisr will always “put the customers best interests first and continue to deliver on our purpose around financial wellness for Australians."
Similarly Lumi CEO Yanir Yakutiel (pictured below), described the relaxation of responsible lending laws as a positive – allowing banks and institutions to make decisions based on the merit of applications as opposed to being “shackled by regulations”.
He added that increasing access of credit into the market will be beneficial for the Australian economy.
However, Leica Ison, CEO of regtech Skyjed (pictured below), said the announcement does not mean banks can relax in their obligations to borrowers.
"Relaxing the lending criteria is being rightfully met with some concern amongst consumer protection groups with the move back to 'borrower beware' lending criteria,” Ison said.
“But in our view, it's the banks that still need to be aware, and they still have the most to lose” she said.
She highlights that the regulatory environment today is far more stringent and complex and provides a much more robust safety net for consumers.
“Banks should not fall into the trap of not understanding target market determination and ASICS' design and distribution requirements even as lending criteria relaxes.
“Poorly targeted products will be investigated,” Ison warned
She highlighted the recent $1.3 billion Westpac settlement with Austrac as a case in point and should remind bankers about the importance of having proper systems in place that support consumer obligations.
“Whilst the move is certainly a positive for growth as we recover from COVID, there is every reason to believe the banks will be treading far more cautiously with their product governance this time than they have in the past."