Australia’s Banks have a rule book created for stronger protections for customers: The Banking Code of Practice.
28 November 2022
ABA CEO Anna Bligh spoke with ABC NewsRadio’s Thomas Oriti on the responsible lending laws that protect Australian customers, as well as specific lending products available to Australians on paid parental leave.
This interview was in reply to allegations of discrimination which, upon investigation, proved to be requests for paperwork. ASIC clearly states in Regulatory Guide 209 that banks need to ask about the source/nature/frequency of income and reasonable foresesable changes when providing approval for lending products.
Thomas Oriti: Banks and other lenders are routinely discriminating against women who apply for loans and credit cards while on paid parental leave. As we’re hearing this morning, multiple women have told the ABC their loan applications have been cancelled, or onerous requirements have been imposed on them simply because they’re on parental maternity leave. The banks say they have to account, of course, for a person’s ability to repay what they’ve learnt, er – what they’ve been lent, sorry. Anna Bligh, who is the CEO of the Australian Banking Association, joins us now. Good morning. Thank you for your time.
Anna Bligh: Good morning, Tom. How are you?
“In fact, the law requires that. It requires banks to individually verify and document the circumstances of every applicant, so that you need to verify and document what their income is, and what their expenses will be.”ABA CEO Anna Bligh, on responsible lending laws
Thomas Oriti: Not too bad. Thank you. Thank you for joining us. What do you make then of these allegations of discrimination?
Anna Bligh: Well, I think it’s very important to understand that Australia’s banks, like many other parts of the community, have obligations under the Anti-Discrimination Act of Australia, and they take those obligations incredibly seriously. Those obligations, however, sit beside other obligations, such as a requirement at law to rigorously test a person’s income and expenses before giving them a lending product, and not only to test them, but to have documentation to verify them.
So the stories in the reports that I’ve heard this morning, are stories where somebody on maternity leave has applied for a loan, and the bank has asked them to seek a letter from their employer verifying that they will be going back to work and the salary and circumstances in which they’ll be returning.
This is no different than someone being asked the payslips to verify their income, or somebody who may have another change of circumstance, such as you know, they’re getting a promotion that starts in January, and they want to apply for a renovation loan – the bank would ask for a letter from their employer to verify the promotion.
“A number of our banks actually have maternity leave lending products that are specific to people on parental leave, paid and unpaid, to help them through, what as I said, can be a difficult time.”ABA CEO Anna Bligh
So, there’s two obligations here. And I would say that Australia’s banks also, many of them, are bending over backwards to help women and families who are going through the early stages of parenthood, many of them have specific lending products for people on maternity leave, where they can pause their payments, or in fact, reduce their payments, for a period of time.
So I think if I look at what banks are doing, why not say – “it’s very reasonable that they have to verify, under the law, and document that” that they would ask for a letter, and that’s all that’s been alleged here in this article.
Thomas Oriti: No. What I’m reading in some of the coverage is that the bank just looked at a pay slip and saw birth leave, and they said, there’s a problem, we can’t approve the loan.
Anna Bligh: Well, what I’ve read, is if it says on your pay slip, ‘birth leave’ or ‘maternity leave’, you will be required to take one more step, and that is have a letter from your employer to verify that you are returning to work, and the salary that you’ll be on when you return it.
Thomas Oriti: That’s what’s supposed to happen. Are you confident that is happening across the board?
Anna Bligh: Well, as I said, that’s what it says in these articles, that the person was identified as maternity leave, and then asked to go to their employer and get a letter to verify.
Now, I understand that being on maternity leave, you know, people can, you know, feel that things are being done that shouldn’t be done that way. And I, you know, I think it is important that banks understand how what that experience feels like for people, and that they are careful in how they convey their obligations. And if they’ve done that in some of these circumstances in a way that makes those women feel that they have been treated in a way that they shouldn’t be, then that’s a really important thing for banks to take on board.
“the lending laws are very important protections against banks lending money to people that they can’t afford to repay.”ABA CEO Anna Bligh
But it will always be the case that people who are on that kind of leave will be asked to verify with documents, because that’s what’s required by the law.
Thomas Oriti: So it is a case, though, because the Consumer Action Law Centre’s saying that the banks should, you know, consider each application on its merits, right, rather than this blanket idea that you’re on some sort of maternity leave and an application will be approved. It sounds like you do agree with that, that each case should be assessed on a case-by-case basis on its merits.
Anna Bligh: Absolutely, in fact, the law requires that. It requires banks to individually verify and document the circumstances of every applicant, so that you need to verify and document what their income is, and what their expenses will be.
Thomas Oriti: It’s a tricky situation, though, isn’t it? Sorry to interrupt there. But you know, obviously that goes down to your ability to repay what you’ve been lent and of course, I understand the checks and balances there. But we have heard from some advocates who say that, you know, what they perceive as apparent discrimination you disagree that could limit a woman’s financial independence and some women in unsafe situations could be denied a line of credit when they’re on paid parental leave. Is anything going on to mitigate against that? Are the banks doing anything to prevent something like that from happening?
“if it says on your pay slip, ‘birth leave’ or ‘maternity leave’, you will be required to take one more step, and that is have a letter from your employer to verify that you are returning to work, and the salary that you’ll be on when you return it.”ABA CEO Anna Bligh
Anna Bligh: Well, firstly, I’d say the lending laws are very important protections against banks lending money to people that they can’t afford to repay. There are few circumstances that contribute to poor financial well-being more, than being in debt – having a debt that you can’t repay. So the responsible lending laws are very, very important to protect, whether it’s mums on maternity leave, or, you know, dads who are temporarily unemployed, or, you know, anybody needs to make sure that we’re not lending to a level that people cannot afford.
So that’s why all those checks and balances are there, and they’re a very important protection. In terms of understanding, that this can be a challenging financial time for some people, as I said, earlier, a number of our banks actually have maternity leave lending products that are specific to people on parental leave, paid and unpaid, to help them through, what as I said, can be a difficult time.
Thomas Oriti: Is that sort of, does that go down to how much they’re they’re given or interest rates, or… what changes under a specific maternity leave product?
Anna Bligh: Well, for example, it could be that you are entitled to either pause your payments on the loan, during the period of maternity leave, or reduce those payments, if you if you need to. As I said, deliberately designed to get people through a period of time that for some families can be quite financially challenging, because not all of the leave that some women take is fully paid.
So you know, it’s not the banks aren’t thinking carefully about these issues, they want to help customers. And sometimes, as I said, that juggling those obligations about lending carefully, responsibly, but there’s nothing in any of the reports that I’ve seen, that says people are being denied loans, but it’s what the report says is that they are being asked to further verify with a letter from their employer, about their return from maternity leave.
And I can understand why that feels onerous to people. But it’s required by law. And those laws are there for a very good reason.
So sometimes anybody going and applying for something to a bank listening to you today will think, yep, every time I go to talk to them, they want a lot of paperwork. And that can feel, you know, very frustrating, and I appreciate that. But there’s those laws are there for very good reasons and sometimes are very frustrating,
Thomas Oriti: We’ve run out of time. Thank you very much for joining us.
The Australian Banking Association (ABA) has welcomed the Treasurer’s announcement today of a major overhaul of Australia’s payments system.
“Australia has witnessed a phenomenal shift in customer banking and payment preferences in recent years,” ABA CEO Anna Bligh said.
The RBA continues to address the nation’s inflation challenge with today’s 0.25% increase in the cash rate target, to 4.10%.