Warning Bells, page-33

It is interesting that in the recent CCP May guidance, CCP makes much of the fact that it is not into payday lending, SACC lending, MACC lending and consumer leasing, and hence it is not much threatened by regulatory brouhaha.

Personal loans are categorised in Australian regulations as being either SACCS, MACCS or by default X, an unnamed category. CCP and MNY (Money3) have abandoned SACC and MACC lending in favour of focusing on X lending. If you read the personal lending regulations, you would know that nearly all of TGA's consumer leases would, if treated similar to personal loans, be comparable to X loans, and that is what the current recommendations are. The effect of applying X-loan interest caps to consumer leases is that interest may be set at 4% a month for the duration of the term to a maximum of four years, which seems to cover what TGA now applies to 3- and 4-year leases, and hence there is, I think, little to concern TGA's management.

I have not looked into TGA's 2-year leases, but that is a small part of TGA's business, and a business that I have always disliked. As CCP, MNY and TGA itself have recently demonstrated, it was relatively easy to abandon the SACC and MACC lending business, and perhaps doing so was advantageous anyhow. Skipping out of the 2-year consumer leasing business should be a doddle – a blessing even. Perhaps, TGA should never have entered that business in the first place.

Brokers' opinions are currently biased towards the notion that TGA faces significant regulatory risks, although cogent supporting arguments are not advanced. I think brokers substantially copy each others' opinions. I could be wrong, but as much as I have looked into this matter, I cannot see that regulatory changes are likely to significantly harm TGA. Harm may spring from elsewhere, but that is a different issue.

The Annual Report scheduled for Wednesday, 18/05/2016, should give us a base from which we can work up something new to post on HC.