https://static.treasury.gov.au/uploads/sites/1/2017/10/c2017-t229374-Explanatory-Memorandum-1.pdfDraft law recommended by the Senate Inquiry link above.
The main sticking point for the industry is the restriction on maximum percentage of income that can be used to repay a SACC loan. The draft law calls for 10% max, while industry wants 20% of net income max to remain, Rob Bryant former CEO of MNY chairs this lobby group.
2.11 The Bill amends the Credit Act to establish a mechanism for restricting the payments that are allowed under a SACC for all consumers, without the need for the Credit Regulations to specify a class of consumers to whom the restrictions apply, as required under the current law. It is intended that this legislative change will be complemented by regulations that cap SACC repayments at a maximum of 10 per cent of a consumer’s net income (the protected earnings amount). These regulations will be consulted on separately from the Bill.Further:
2.24 It is intended that amendments will be made to the Credit Regulations implementing the Review’s recommendation that the protected earnings amount be reduced from 20 per cent of a consumer’s gross income to 10 per cent of a consumer’s net income. The Government will consult separately on amendments to the Credit Regulations at a later date. Even without this inquiry, Labor was pledging to introduce this reform (among others) from the draft bill which have been delayed under the Coalition Government. Safe to say that in the context of MNY, it's no longer material to the business. However, the recommendation relating to MACC loans could be more material, especially if a similarly low income cap is introduced, although no specific new regulations have been announced. Essentially, the inquiry has recommended another inquiry, so there may be tightening in this area (under a new Labor Government if they win) within the next couple of years. Though once again, how material this will be to MNY at this time is debatable. In the most recent report, MNY mentioned a new product offered to existing customers that offers interest rates within the mainstream lending cap (48%). MNY, as Credit Corp has done, could offer these personal loans to higher quality borrowers in the future side stepping the increased regulation on the higher interest MACC loans, if regulation decreasing the profitability actually occurs and, in any event, you could assume that with MNY's scale it would be best placed to absorb this.
Recommendation 5
1.35 The committee recommends that Treasury undertake a review to identify necessary reforms to regulatory arrangements for medium amount credit contract products. Bottom line is, I can't see how this inquiry is a negative for MNY in it's current form. The exit/run down from SACC and continued growth of much lower interest auto/personal loans should insulate MNY from the increased regulation coming from the tipped to win new Labor Government. No real negatives for the buy now, pay later segment either. Basically, they want existing draft laws on 'pay day ' loans, more funding for regulators, increased scrutiny and some more inquires at a later date. Nothing in there really threatens business models, maybe with the exception of pure play SACC lenders that won't be able to lend as much because of the net income cap of 10% (this still has to be made law!), but once again not that material to MNY.
