The Australian Financial Complaints Authority (AFCA) has published its Responsible Lending Approach. The Approach does not change or create new requirements but is intended to help complainants and financial firms better understand how AFCA reaches decisions.

Responsible lending complaints are complaints about credit contracts regulated by the National Consumer Credit Protection Act 2009 (Cth) (National Credit Act). This approach document does not apply to complaints about lending to small businesses or other credit contracts not regulated by the National Credit Act.

AFCA says it cannot usually consider a complaint about a lender’s decision not to provide a loan. However, it may be able to consider a complaint about a lender’s decision if it relates to a breach of a contractual or legal obligation.

For example, AFCA may be able to consider the complaint if the borrower says the lender:
• unlawfully discriminated against them when deciding not to provide a loan, or
• made an error when declining a request to substitute a security property for an existing loan.

The Approach explains how AFCA considers responsible lending complaints, including:

• how it assesses a financial firm’s compliance with responsible lending obligations
• how it determines a fair outcome where a financial firm breaches its responsible lending obligations, and
• how it calculates loss and assesses benefits to determine fair compensation.

It outlines how AFCA applies legal principles, industry codes, regulatory guidance and considers good industry practice and principles of fairness when investigating responsible lending complaints.

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