ASIC has released Regulatory Guide 209 Credit licensing: Responsible lending conduct obligations (RG 209) to provide regulatory guidance for credit licensees about the responsible lending obligations in the National Consumer Credit Protection Act (National Credit Act).
The responsible lending conduct obligations will apply to non-ADIs and non-RFCs (and their credit representatives) from 1 July 2010.
They will apply to ADIs and RFCs (and their credit representatives) from 1 January 2011.
Other responsible lending obligations (including disclosure requirements, such as upfront disclosure of broker fees and charges) will apply to all licensees and credit representatives from 1 January 2011.
RG 209 is designed to help credit licensees and credit licence applicants to:
- develop arrangements and systems to meet their responsible lending obligations; and
- understand what ASIC expects when assessing whether licensees are complying with their responsible lending obligations.
The key responsible lending obligation is that credit licensees must not suggest, assist with or provide a credit product that is unsuitable for a consumer.
Before a credit licensee suggests, assists with, or provides a new credit contract or lease to a consumer, the credit licensee must:
- make reasonable inquiries of the consumer about their requirements and objectives in relation to the credit contract;
- take reasonable steps to verify the consumer’s financial situation;
- based upon these inquiries, assess whether the credit product is unsuitable for the consumer and only proceed if the credit product is not unsuitable; and
- give the consumer a copy of the assessment if requested.
A contract will be unsuitable if the consumer would be unable to repay it without substantial hardship or it will not meet the consumer’s requirements or objectives. The requirements also apply where the credit limit on an existing contract is being increased.
