ASIC updates responsible lending guidance

ASIC has published its updated guidance on the responsible lending obligations contained in the National Consumer Credit Protection Act 2019.

Following an extensive consultation, the regulator has sought to provide greater clarity and support to lenders and brokers in meeting their obligations while maintaining a principles-based aproach that allows for flexibility.

The changes include:

• A stronger focus on the legislative purpose of the obligations; namely, to minimise situations where consumers are encouraged to take on unsuitable levels of credit, as well as ensure credit providers obtain sufficient, reliable and up-to-date information about the consumer’s financial situation, requirements and objectives to assess whether a particular loan is unsuitable. 
• More guidance to illustrate where a licensee might undertake more, or less, detailed inquiries and verification steps based on different consumer circumstances and the type of credit that is being sought, including new examples about a range of different credit products – including large and longer-term loans, credit cards and personal loans, small amount loans and consumer leases; and different consumer circumstances – such as first home buyers, existing customers, strata corporations, high net worth and financially experienced consumers.
• More detailed guidance about the use of benchmarks as a way to check the plausibility of expenses, as well as additional guidance about the HEM benchmark.
• Clarity about more complex situations for some consumers – such as income from small business, casual employees, new employees, the gig economy, as well as joint and split liabilities and expenses.

ASIC has also addressed the scope of responsible lending, explaining the areas that are not subject to responsible lending obligations – such as small business lending irrespective of the nature of the security used for the loan.

According to ASIC commissioner Sean Hughes, “ASIC conducted extensive consultation on this important issue.

"The public hearings and submissions highlighted the areas where industry sought clarification from ASIC. We have listened carefully to all stakeholders and addressed areas where we consider updated guidance would help. We hope that today’s guidance will assist industry to more confidently make responsible lending decisions and to facilitate good lending outcomes for consumers," he added. 

The guidance has also been updated to reflect technological developments including open banking and digital data capture services. 

The full Regulatory Guide 209 can be viewed or downloaded at: 

https://download.asic.gov.au/media/5402607/rg209-published-9-december-2019.pdf