Margin loans are to be specifically regulated for the first time in Australia.

Financial Services Minister Chris Bowen introduced to parliament amendments to the Corporations Act on Thursday to protect consumers from harmful lending practices and reduce the risk of them losing their homes.

Mr Bowen said that while margin lending had dropped during the past 12 months, it had skyrocketed during the past decade — from $4 billion in June 1999 to $37 billion in December 2007.

“Over the past 12 months, in the fall-out from several high-profile financial collapses, many investors lost hundreds of thousands of dollars due to margin loans,” Mr Bowen said.

“And in some cases they even lost their family homes.

“While properly-geared margin lending, backed by full disclosure, does have a place in our financial services landscape, we cannot tolerate ordinary Australians being misled into grossly inappropriate margin loans that can cost a family everything they own.”

For the first time margin loans would be covered by specific rules, Mr Bowen said, adding lenders and advisers would have to be licensed.

Before giving a margin loan, lenders would have to consider whether it could cause the borrower substantial hardship — including, specifically, the loss of the family home.

“If that is the case, the law says that the loan must not be provided,” Mr Bowen said.

The new system also clarifies the responsibilities of lenders and advisers to tell a borrower when a margin call occurs.

“In the past, delays in margin call notifications due to disagreements between lenders and advisers have contributed to losses suffered by consumers,” he said.

AAP