That follows a meeting of the Council of Australian Government (COAG) last year in which states and territories agreed to transfer responsibility for supervision and regulation of consumer credit to the Commonwealth.
After seven months of negotiations conducted by Superannuation and Corporate Law Minister Nick Sherry, that has now been finalised.
A government source said this new legislation, set to be introduced to parliament around September, would cover bank and non-bank mortgages, payday lending, store and car finance and other consumer credit.
That will require lenders to abide by a code of responsible lending, legally obliging them to conduct an assessment of a borrower’s capacity to repay any proposed loan.
All credit providers will have to be licensed.
The corporate watchdog the Australian Securities and Investment Commission (ASIC) will gain responsibility for supervising credit providers.
The elderly, many now using using reverse mortgages to compensate for shrinking superannuation returns, will also receive new protection.
Any lender breaching the responsible lending code once could face hefty fines with repeated breaches incurring loss of licence.
Borrowers will be able to take the lender or bank to an independent disputes resolution body.
AAP