Last week, the opposition Deputy Whip and NSW senator Jenny McAllister moved to bring several providers in the finance industry before the economics references committee as part of an inquiry.
Ms McAllister called for an inquiry and report by 22 February 2019 into “credit and financial services targeted at Australians at risk of financial hardship”.
Specifically, the Senate has been asked to look at the impact on individuals, communities and the broader financial system from the operations of:
- payday lenders and consumer lease providers;
- unlicensed financial service providers including “buy now, pay later” providers and short-term credit providers; and
- debt management firms, debt negotiators, credit repair agencies and personal budgeting services.
Further, the inquiry expects to cover “whether current regulation of these service providers meets community standards and expectations and whether reform is needed to address harm being caused to consumers”.
Ms McAllister called for the inquiry to also review the present capacity and capability of the financial counselling sector to provide financial counselling services to “financially stressed and distressed members of the community”, as well as any other matters that may arise from the inquiry.
Several of the companies that will likely be brought into the inquiry, such as Afterpay Touch Group, saw their share price fall markedly on the day of the announcement, followed by a recovery.
Short-term lenders and your mortgage
A prospective borrower's use of short-term lenders and “buy now, pay later” providers is now factored into a lender's risk assessment.
“Some banks now require transaction statements, which means borrowers can’t hide with their history of spending. The rise in ‘tap and go’ payments plus technology such as bankstatements.com.au can classify spending into categories and give a lender full visibility on applicant’s spending patterns and how much they save – this level of disclosure is unprecedented,” Aaron Christie-David, managing director at Atelier Wealth, told Nest Egg last month.
“Examples include Afterpay, frequent holidays, high spending on credit cards and even spending on gambling, alcohol and dining are being hauled into question if they are ongoing expenses after their loan has settled or if this constitutes discretionary spending."