Interesting article in The Australian today covering a survey by eBroker which gives insights on the rapid growth in non-bank business lenders.
The question of regulation of business lenders is generally not well understood, we find. As neither an AFSL or credit licence is not required to lend to businesses, you cannot obtain one even if like us you would like one. The same applies to established non-bank lenders like Scottish Pacific. So there’s a bit more to it than APRA.
In 2008, COAG agreed to a two phase reform process for the regulation of credit and that in Phase Two the Commonwealth would consider the need to change the definition of regulated credit, and to address practices and forms of contracts that were not subject to the Credit Act. After lengthy consultation, on 21 December 2012, the Minister for Financial Services and Superannuation, Bill Shorten, released for public consultation draft legislation to address perceived gaps in existing credit regulation and enforcement. In typical “Yes Minister” style, after many detailed contributions, the consultation was kicked into the long grass because another inquiry, the Financial Systems Inquiry, had started!
With an increasing focus on the problems for SMEs in accessing finance, hopefully this issue will rear its head again as we certainly need some standards to be applied. For example, effective interest rates (APR) which very few seem to understand.
JUNE 22, 2016
Non-bank business lenders are receiving more than $1.1 billion of loan applications every month as awareness of new fintech operators and other alternative providers accelerates, according to a new survey.
Providing insight into the level of demand for loans outside traditional banks, the survey by online business lending aggregator eBroker found non-banks were attracting at least 11,676 loan applications a month, worth $1.13bn.
Non-banks are alternative lenders that don’t take deposits, sidestepping the need for a full banking licence and oversight by the Australian Prudential Regulation Authority.
The survey, conducted with marketing company WebBuzz, took place in early May and included the chief executives of 29 non-bank business lenders, including providers of unsecured cash flow loans, equipment finance, invoice discounting and trade finance.