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Small business credit – Regulation Impact Statement – The Treasury

On 21 December 2012, the Minister for Financial Services and Superannuation released for public consultation draft legislation to address perceived gaps in existing credit regulation and enforcement.  A review of the provision of credit to small business has shown that, while the majority of small business lenders and brokers provide a valuable service, some practices exist that result in high financial losses to small business borrowers. The draft legislation seeks to strengthen protections for small business borrowers, particular where the loan in secured against the family home, including by extending the Australian Securities and Investments Commission’s supervision and enforcement ability. While difficult to quantify the costs and benefits, some lenders will incur additional one-off implementation costs. Most lenders will not incur these costs as they already comply (or can readily comply) with the proposed changes.  Borrowers, particularly those which have exhausted mainstream alternatives, may find it more difficult and costly to obtain credit but will have access to redress if misconduct occurs. The Regulation Impact Statement was prepared by the Treasury and assessed as adequate by the Office of Best Practice Regulation.