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10-32AD ASIC releases guidance for credit licensees about responsible lending obligations

Friday 26 February 2010


ASIC today released regulatory guidance for credit licensees about the responsible lending obligations in the National Consumer Credit Protection Act (National Credit Act). ASIC’s Regulatory Guide 209 Credit licensing: Responsible lending conduct obligations (RG 209) has been developed to help industry understand ASIC’s expectations in relation to their responsible lending obligations as credit licensees.

The release of this regulatory guide is part of ASIC’s effort to provide early guidance to assist credit licensees to comply with their responsible lending obligations on the commencement of the National Consumer Credit regime in July 2010. The responsible lending conduct obligations will apply to brokers and some lenders from 1 July 2010.*

The responsible lending obligations are key new requirements under the National Credit Act. RG 209 takes into account feedback from individual industry participants, industry organisations and consumer representatives following the release of a consultation paper on responsible lending last year (Consultation Paper 115 Responsible lending)

‘The responsible lending obligations are important obligations under the National Consumer Credit regime and are new to industry', ASIC Commissioner, Dr Peter Boxall said.

'This guidance will assist industry and consumer groups understand our expectations about meeting the responsible lending obligations. We will continue to work with industry organisations and consumer representatives to provide further clarity and guidance if and where necessary’, Dr Boxall said.

RG 209 is designed to help credit licensees and credit licence applicants to: RG 209 recognises that the responsible lending conduct obligations in the Credit Act are designed to work in a flexible way and that it is the credit licensee’s responsibility to put in place arrangements to comply with the responsible lending conduct obligations. RG 209 is principles based guidance that is designed to apply to a wide range of scenarios. ASIC will continue to assess the need for further guidance following the commencement of the regime.

ASIC has also released a feedback report on the consultation process: see Report 191 Response to submissions on CP 115 Responsible lending (REP 191).


Background


The National Credit Act requires credit licensees to meet responsible lending conduct obligations. These obligations will apply to both credit providers (e.g. lenders, such as banks, credit unions and finance companies) and credit assistance providers (e.g. mortgage or finance brokers).

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: 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.

*Transitional dates
The responsible lending conduct obligations for brokers and some lenders will apply from 1 July 2010. For the remaining lenders (i.e. authorised deposit-taking institutions (ADIs) and registered financial corporations (RFCs)), the obligations will apply from 1 January 2011. The table below sets out the implementation schedule around responsible lending:

Responsible lending requirement
Implementation date
Responsible lending conduct obligations (i.e. requirement not to arrange or provide credit that is unsuitable) – non-ADIs and non-RFCs (and their credit representatives)
From 1/7/2010
Responsible lending conduct obligations (i.e. requirement not to arrange or provide credit that is unsuitable) – ADIs and RFCs (and their credit representatives)
From 1/1/2011
Other responsible lending obligations (including disclosure requirements, such as upfront disclosure of broker fees and charges) – all licensees and credit representatives
From 1/1/2011

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