ASIC has released updated guidance to help industry comply with responsible lending obligations under the National Consumer Credit Protection Act 2009.
Regulatory Guide 209 Credit licensing: Responsible lending conduct (RG 209) now includes guidance on the new responsible lending provisions under the Consumer Credit Legislation Amendment (Enhancements) Act 2012 (Enhancements Act). Some minor clarification of existing guidance has been included.
ASIC Commissioner Peter Kell said today's guidance assists those engaging in credit activities to be aware of their obligations when considering the additional requirements under the Enhancements Act.
‘ASIC will adopt a balanced approach to administering the new requirements when industry makes efforts to comply, and the updated guidance will assist in that regard. ASIC will work with industry participants to address and rectify any problems.
‘However, ASIC will take a tougher approach where deliberate breaches, serious misconduct or significant risk of consumer detriment occur.
‘ASIC will review its approach and compliance expectations after the first few months, by which time industry should have fully adapted to the new obligations’, Mr Kell said.
RG 209 now includes guidance:
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for small amount lenders when considering the presumption of substantial hardship and protected earning amount requirements
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in relation to obtaining and considering account statements when undertaking an assessment for a small amount loan
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on the responsible lending obligations for lessors
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on the responsible lending obligations for lenders offering reverse mortgages
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about a new obligation on credit providers and lessors to assess whether a credit contract or consumer lease is unsuitable for a consumer before making an unconditional representation about whether the consumer can enter a credit contract or lease, or increase the credit limit on an existing credit contract.
The majority of provisions in the Enhancements Act commence on either 1 March or 1 July 2013.
ASIC has also updated Regulatory Guide 204 Applying for and varying a credit licence (RG 204) and Regulatory Guide 206 Credit licensing: Competence and training (RG 206) to reflect these new laws.
See ASIC’s credit page for more information about the consumer credit regime, including relevant policy announcements and regulatory guidance.
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Background:
The Enhancement Act includes:
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new provisions that impose additional requirements on licensees who provide, or provide credit assistance in relation to, small amount credit contracts. These requirements are included in Ch 3 of the National Credit Act, which deals with responsible lending conduct
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new provisions that impose additional obligations in relation to reverse mortgages
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an additional requirement for licensees that are credit providers or lessors to assess whether a credit contract or consumer lease is unsuitable before making an unconditional representation about the consumer’s eligibility to enter a credit contract or consumer lease with the licensee, or whether a credit limit on an existing credit contract with them will be able to be increased; and
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changes to provide greater regulatory consistency between consumer leases and credit contracts.
The updates to RG 209 have been made to reflect these provisions.
The Enhancement Act also includes new restrictions on the use of certain words, including 'independent', 'impartial', 'unbiased' and 'financial counsellor'. RG 204 and RG 206 will be updated to reflect these new restrictions.