Crazypunter I think one or more of your earlier posts agreed...

Crazypunter

I think one or more of your earlier posts agreed that the likely allowable interest rate applied to consumer leases is unlikely to be a problem for TGA, because its current leasing payments substantially fit within the cap applicable to comparable personal loans, mainly 4% a month. This is what the Review Panel has recommended to Treasury.

You now raise responsible-lending criteria as a potential drag on TGA's ability to write business. This is a valid point, but not having dwelt long on the matter, because I did not see it as a threat, I cannot give a fact-supported answer without research. I will look into the issue, but I decided to wait for the FY2016 Annual Report, which may contain fresher information pertinent to the matter.

I understand that TGA was recently changed its credit assessment methods, and that there was an incorrect past use of the Henderson Poverty Index, because TGA did not assiduously adjust its internal qualification algorithms for each small change to the Henderson Poverty Line. The immediate changes that TGA introduced had no impact on the volume of new business written, and TGA planned to go beyond that, because the Henderson Poverty Line is a crude indicator of poverty that ASIC itself dislikes.

TGA has historically had remarkably low levels of contract default, and high levels of extensions on contract expiries, so I suspect that its credit assessment methodology is not going to be much threatened by regulatory tightening. TGA now also has options to shift its deployment of funds to areas like PDLs, and commercial lending and commercial leasing, so it can via marginal shifts adapt to a changing credit providing milieu.

Just as “Many hands make light work” can be gainsaid by “Too many cooks spoil the broth”, “Flotsam on the ebb tide, all washed up and going nowhere” can be countered by “The baby tossed out with the bathwater”