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The government has announced it is reducing the cost and time it takes consumers and businesses to access credit.
The government has announced it is relaxing lending rules to ensure small businesses can get timely access to credit as the economy moves into recovery mode.
Under the plan announced on Friday by Treasurer Josh Frydenberg, lending laws will be changed to lift onerous barriers to small businesses applying for loans.
"What started a decade ago as a principles based framework to regulate the provision of consumer credit has now evolved into a regime that is overly prescriptive, complex and unnecessarily onerous on consumers," said the Treasurer in recognition of the outdate laws currently in place.
As such, the government will simplify the system by moving away from a “one-size-fits-all” approach while at the same time strengthening consumer protections for those that need it.
Key elements of the reforms include:
"These changes will make it easier for the majority of Australians and small businesses to access credit, reduce red tape, improve competition, and ensure that the strongest consumer protections are targeted at the most vulnerable Australians," said Mr Frydenberg.
Applauding the government’s move, the small business ombudsman reiterated the importance of access to finance to small-business survival.
“The reforms outlined today would give small businesses the confidence they need to seek funding to get through this crisis so they can grow and employ,” said Australian Small Business and Family Enterprise Ombudsman Kate Carnell.
“Since the banking royal commission, small businesses have faced an uphill battle to secure a loan, due to unrealistic serviceability requirements from the banks.
“The pendulum has swung too far and now is the time to correct this imbalance which is harmful to small businesses.”
The government will consult publicly with stakeholders before finalising any legislation required to implement the reforms.