CAFBA lobbies and advocates on behalf of the commercial and asset finance industry in Australia with Federal and State Government and regulators.
CAFBA has directly developed strong relationships with the federal parliament and key regulators and leverages its membership of the Council of Small Business Organisations of Australia (COSBOA) to drive positive outcomes for legislation and regulation.
CAFBA is frequently consulted on financial industry issues and developments and contributed at the 2019 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. As a result, it was pleasing that it was noted in Commissioner Hayne’s final report that there was no market failure in the commercial broker channel which CAFBA represents.
It had been CAFBA policy for many years that National Consumer Credit Protection Act should not extend to small business lending, and also the Point of Sale Exemption should be removed, and therefore CAFBA was very pleased that the Royal Commission endorsed both these policies for the sector.
CAFBA made a submission the Productivity Commission’s report into Competition in the Australian Financial System in 2018, with the following comments and recommendations in the final report:
The Commercial and Asset Finance Brokers Association of Australia (CAFBA) (sub. DR92), noted that its members, in arranging consumer finance, were bound by the legislation whereas retailers acting as POS vendors were not subject to the legislation. This could provide the opportunity for high risk consumer finance to be provided to the detriment of consumers and with limited options for redress. It said:
The exemption, therefore, does not provide any means of adequately regulating or controlling the activities of POS vendor introducers who may cause loss or damage to consumers, despite their linked credit providers/lessors being responsible for their conduct. (sub. DR92, p. 7)
The Commission therefore made the following Recommendation:
RECOMMENDATION 15.2 REVIEW OF NCCP ACT EXEMPTIONS: The Treasury should complete its 2013 review into the current exemption of retailers from the National Consumer Credit Protection Act 2009 (Cth), with a view to removing or reforming the exemption. The report should be made public on completion.
The Commercial and Asset Finance Brokers Association of Australia noted the incentives that these risk weightings provided to lenders to use residential property as security: Due to the low-risk weightings on home loans and high-risk weighting on commercial loans, it is more economic for banks to focus on using the family home as security for finance in preference to SME loans or commercial equipment finance (sub. DR92, p. 4)
The Commission made the following recommendation:
RECOMMENDATION 16.1 STANDARDISED RISK WEIGHTINGS FOR SMALL BUSINESS LENDING: Instead of applying a single risk weight to all small and medium business lending not secured by a residence, APRA should provide for a broader schedule of risk weights in its Australian Prudential Standard (APS 112). It should take into account the different risk profile and the type of lending (such as the value of the loans made to an individual business and alternative forms of loan security including commercial property and differing loan to value ratios on this security) to better reflect the Basel Committee’s standardised risk weightings.
The CAFBA Board carefully monitor and address emerging issues in the industry to ensure that the commercial finance industry is appropriately recognised and fairly regulated.