To help small businesses get access to credit quickly and efficiently, the Government is providing greater certainty by ensuring that responsible lending obligations do not apply to the provision of credit to small businesses.
Currently, responsible lending obligations do not apply to lending which is predominantly for business purposes. To fall within this exemption, a lender must undertake due diligence to confirm that the money borrowed meets this test.
To allow lenders the ability to move quickly to support small businesses, the Government will provide an exemption from responsible lending obligations for a period of six months in relation to the credit they extend to their existing small business customers, provided there is an existing borrowing relationship and 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.
Credit providers regulated by the Australian Prudential Regulation Authority (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 Australian Financial Complaints Authority will retain its current jurisdiction to resolve complaints relating to lending.
The Government recognises that the environment for small business has changed and continues to evolve with the rapidly-evolving challenges posed by the coronavirus. This exemption represents a deliberate, measured and targeted adjustment of regulatory settings to provide the certainty and confidence necessary to allow small businesses access to credit in a timely and efficient manner.
These changes complement the Government and Reserve Bank of Australia’s coordinated actions yesterday to inject $105 billion into the financial system to support small and medium businesses to deal with the economic challenges that are being caused by the spread of the coronavirus.
The Morrison Government will continue to work closely with the banking industry and our financial regulators to support Australian jobs and businesses during this challenging time.