The government passed the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 through the House of Representatives on 15 March.
Included in the reforms are moves to reduce the cost and time it takes to access credit for Australian consumers and businesses, removing unnecessary barriers to accessing credit.
However, with the bill yet to pass through the Senate and with the exemption due to expire on 2 April, Mr Frydenberg extended the exemption until the bill passes the Senate.
“The credit reforms contained in the bill are important for continuing to enable the Australian economy to recover from the COVID-19 pandemic,” Mr Frydenberg said.
“These reforms follow on from the government’s swift action during the onset of the pandemic to exempt the provision of credit to small businesses from the responsible lending obligations. This exemption is due to expire on 2 April 2021.
“The extension will continue to provide the certainty and confidence necessary to allow small businesses to access credit in a timely and efficient manner.”
ASBFEO, RBA want easier access to finance for SMEs
The announcement comes amid calls from Reserve Bank of Australia assistant governor Christopher Kent and small business ombudsman Bruce Billson to allow easier access to finance for small businesses.
In an address to the Australian Finance Industry Association, Mr Kent said many of the challenges small businesses face when accessing finance have been around for many years.
Mr Kent also called on the banks to treat small businesses differently to consumers when considering loan applications.
“Much of this has reflected the application of pre-existing lending standards in a weaker economic environment. But lending standards have also been tightened,” he said.
“For example, banks have required a greater degree of verification of borrowers’ information, and banks have been more cautious about lending to new business customers and to the sectors hit hardest by the pandemic.”
Mr Billson agreed with Mr Kent’s concerns regarding the banks’ lengthy and onerous process to securing finance, including substantial collateral requirements.
“Of course, we need to strike the right balance, but any move to loosen onerous restrictions on access to finance for small business would be positive,” Mr Billson said.
“The RBA has noted it expects business failures to rise as government support measures are phased out. This highlights the critical need for small businesses to have greater access to finance, to provide the cash flow necessary to get through the coming months.”