ASIC has issued a consultation paper (CP 309) to update its guidance on the responsible lending provisions in the National Credit Act in Regulatory Guide 209 (RG 209).
ASIC’s guidance in RG 209 has been in place since 2010 when the responsible lending laws were first introduced. It was last revised in November 2014.
ASIC requests submissions by 20 May 2019 and it expects to respond to submissions in September 2019.
Although the laws have not changed since 2010, since then there have been relevant judicial decisions, ASIC enforcement actions, ASIC thematic reviews, the Financial Services Royal Commission, changes in the law and changes in technology.
ASIC’s review of RG 209 will consider whether the guidance remains effective and identify changes and additions to the guidance that may help holders of an Australian credit licence to understand ASIC’s expectations for complying with the responsible lending obligations.
CP 309 identifies some aspects of the current guidance in RG 209 that ASIC considers may benefit from being updated or clarified, including:
(a) the kinds of information that are available to verify different aspects of a consumer’s financial situation;
(b) the role of expense benchmarks in the process for verifying a consumer’s financial situation; and
(c) what licensees should take into account when inquiring about, and assessing whether a credit product meets, a consumer’s requirements and objectives.
With respect to benchmarks ASIC says it proposes to clarify its guidance in RG 209 on the use of benchmarks as follows:
“A benchmark figure does not provide any positive confirmation of what a particular consumer’s income and expenses actually are. However, we consider that benchmarks can be a useful tool to help determine whether information provided by the consumer is plausible (i.e. whether it is more or less likely to be true and able to be relied upon).”
ASIC CP 309 also identifies a number of issues that are not currently addressed in any detail in RG 209.
ASIC has included proposals for guidance on:
(a) areas where the responsible lending obligations do not apply (e.g. small business lending);
(b) the role of the responsible lending obligations in mitigating risks involved in loan fraud;
(c) how negative repayment history information may be used, and the effect this may have on the kinds of inquiries that should be made with the consumer;
(d) good practices for maintaining records that demonstrate compliance with the responsible lending obligations; and
(e) the purpose and content of the written assessment.
