Responsible lending – insights from Australia

Two leading experts on responsible lending from Australia visited the UK to share lessons on how the for-profit and not-for-profit financial services sectors can improve levels of responsibility in relation to lending.

Gerard Brody is the Chief Executive Officer of the Consumer Action Law Centre based in Melbourne, and Adam Mooney is the Chief Executive Officer of Good Shepherd Microfinance. Gerard and Adam will give formal presentations on recent reforms and initiatives in Australia. 

Gerard will examined the development and impact of the Australian national regulatory framework for consumer credit that commenced in 2010. The framework includes licensing for credit providers and brokers, responsible lending obligations, and mandatory membership of external dispute resolution. The presentation also examined efforts since then to enhance the laws as they apply to payday loans and consumer leasing products, including a proposal to further regulate these products in 2017.

The main focus of the event was on unsecured credit but Gerard also reported on recent concerns in Australia about mortgage broker remuneration leading to poor outcomes, and legal action taken by ASIC (the Australian Securities and Investments Commission) which suggests that credit assessment (using benchmarking or an algorithm) may breach the requirement to inquire into (and verify) an applicant's actual expenditure as part of the assessment process. There have also been recent efforts to bring in ‘more comprehensive’ credit reporting to aid responsible lending decisions and also more competition, but this is causing some difficulty in the marketplace including consumer complaints.

Adam is Chief Executive of Good Shepherd Microfinance which is a world leader in financial inclusion products, services and advice.  He will outline an innovative affordable loans program for people on low incomes in Australia. Good Shepherd Microfinance's No Interest Loan Scheme (NILS) has been running for 35 years and is now in 650 locations through a national connected network of community providers.  Evaluations show that four out of five clients experience economic mobility and four out of five people stop using payday loans. This scheme is run by Good Shepherd Microfinance and involves a leading partnership with the National Australia Bank and federal and state governments.  Inclusive insurance and savings programs have been added recently.

Adam also spoke about Australia's Financial Inclusion Action Plan program, which Good Shepherd Microfinance were appointed by the Australian Government to develop and manage. Emerging from Australia's hosting of the G20 in 2014, this program so far involves 30 organisations including banks, insurers, pension funds, energy companies, universities, state governments, fintechs, community organisations, utilities companies and others committing to large scale, significant actions - measurable, accountable and time specific, which are assured by EY with the social impact evaluated annually.