Responsible lending

Credit licensees must comply with the responsible lending conduct obligations in Chapter 3 of the National Consumer Credit Protection Act 2009 (National Credit Act).

The key concept is that credit licensees must not enter into a credit contract with a consumer, suggest a credit contract to a consumer or assist a consumer to apply for a credit contract if the credit contract is unsuitable for the consumer.

As a credit licensee, you must decide how you will meet the responsible lending obligations.

On 25 September 2020, the Government announced proposed reforms to the responsible lending obligations contained in Ch 3 of the National Credit Act. The proposed reforms will amend the obligations that apply before entry into a credit product or the provision of credit assistance. ASIC’s guidance relating to the current responsible lending obligations will be reviewed and updated when the proposed reforms are finalised.

Conduct

Regulatory Guide 209 Credit licensing: Responsible lending conduct (RG 209) sets out ASIC’s views on the responsible lending obligations, and steps you can take to minimise the risk of non-compliance with these obligations.

The responsible lending obligations involve:

making reasonable inquiries about a consumer’s financial situation, and their requirements and objectives
taking reasonable steps to verify a consumer’s financial situation
making a preliminary assessment (if you are providing credit assistance) or final assessment (if you are the credit provider) about whether the credit contract is 'not unsuitable' for the consumer
if a consumer requests it, being able to provide the consumer with a written copy of the preliminary assessment or final assessment (as relevant).

ASIC's public hearings on responsible lending

In 2019, ASIC held public hearings to help us update our regulatory guidance on the responsible lending obligations: see RG 209, Consultation Paper 309 Update to RG 209: Credit licensing: Responsible lending conduct (CP 309) and read more about the hearings:

ASIC’s 2019 public hearings on responsible lending and updates to RG 209

The hearings were held over two days in Sydney and Melbourne.

MELBOURNE – 19 August 2019, Stamford Plaza Hotel Melbourne, Balmoral Room, 111 Little Collins Street, Melbourne

Read the transcript – Melbourne (PDF 830 KB)

SYDNEY – 12 August 2019, Wesley Conference Centre, Lyceum Room, 220 Pitt Street, Sydney

Read the transcript – Sydney (PDF 610 KB)

Purpose of the hearings

ASIC has power under both the Australian Securities and Investments Commission Act 2001 (ASIC Act) and National Consumer Credit Protection Act 2009 (the National Credit Act) to convene public hearings for the purpose of performing or exercising its functions and powers. ASIC’s functions include providing guidance on the requirements of the laws it administers – including the responsible lending obligations in Chapter 3 of the National Credit Act.

ASIC decided to use its hearing power to help it develop its regulatory guidance on responsible lending obligations. The application of these obligations is critical to the making of appropriate credit decisions, and our guidance on these obligations is a matter of significant public interest.

We considered public hearings would provide a useful and transparent way to robustly test with selected participants some of the main issues and views raised in the written submissions in response to Consultation Paper 309 Update to RG 209: Credit licensing: Responsible lending conduct (CP 309).

Who participated in the public hearings?

ASIC received 72 submissions in response to CP 309. We selected from the submissions some parties that we considered would be able to provide additional views and perspectives on key issues that were raised across a range of industry and consumer stakeholders.

Participant list

Sydney

Commonwealth Bank of Australia
Bank of Queensland
Athena Home Loans
Financial Rights Legal Centre
illion Open Data Solutions
Tic:Toc Online
Australian Retail Credit Association
Westpac Banking Corporation

Melbourne

Consumer Action Legal Centre
Consumer Credit Legal Services (WA)
The Melbourne Institute
LIXI Limited
Mortgage Choice
Connective
Australian Finance Group
Australian Financial Complaints Authority
Auscred Ltd (Lendi)
National Australia Bank
Australia and New Zealand Banking Group

The conduct of the hearings

Commissioners

The hearings were conducted by Deputy Chair Karen Chester and Commissioner Sean Hughes.

Public attendance

The public hearings were open to the public and all interested parties and observers to attend. Reporting of the evidence provided was encouraged.

Only invited participants were permitted to speak on record at the hearings.

Participation

Participants were not compelled to attend the hearing. The hearings were conducted with as little formality as possible. Participants were invited to introduce themselves and make an opening statement if they wished.

ASIC required participants to be truthful in their remarks: a person who appears at the hearing must not give information that is false or misleading in a material particular (section 291 of the National Credit Act).

Recording of proceedings

Proceedings were recorded and live-streamed on ASIC’s website. Transcripts of proceedings are available: see the MELBOURNE – 19 August 2019 transcripts and SYDNEY – 12 August 2019 transcripts.

Disclosure

Information sheet 146 Responsible lending disclosure obligations: Overview for credit licensees and representatives (INFO 146) sets out your credit disclosure obligations under the National Credit Act and related regulations.

ASIC