Published: May 13, 2009 - 10:00 AM
Economic downturn prompts many to curb spending and pay off debts
The Federal Government recently announced changes to consumer credit laws to introduce tougher penalties for irresponsible lending and to license mortgage brokers. The carefree lending practices in the United States housing market, which triggered the global financial crisis, has prompted the government to review consumer lending practices in Australia.
The legislation is scheduled to be introduced in parliament in June and should give extra protection to millions of debt-ladened Australian households. If the new licensing regime is enacted the Australian Law Reform Commission (ALRC) has recommended extra information should be available on consumer credit reports.
Credit reports in Australia are presently only allowed to certain information, such as debts that are over 60 days in default, current credit providers, dishonoured cheques, court judgements and bankruptcy orders. The ALRC is proposing more information should be available on credit reports such as credit limits and repayment performance history. A performance history would indicate how late an individual was in making a repayments to their credit card or credit account.
The proposed changes to the credit laws changes are intended to ensure only those Australians who have the ability to repay loans have access to additional credit. One of the weaknesses of the current privacy laws is they allow people with large debts to get more credit as long as they haven't missed a payment in the past.
A recent report from Veda Advantage says that one in five Australians with debt are still struggling to make repayments and that one in ten Australians are looking to borrowing more credit in the next six months. However the report goes on to say that in the current economic downturn most Australians are living within their budget restraints and are taking advantage of lower interest rates to pay off debts.
« Back to article list
Related Links
Share this article