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Review of Responsible Lending Guidance

February 14, 2019

 

 

The corporate regulator is consulting on updated responsible lending guidance even though laws have not been updated since 2010.

Australian Securities and Investments Commission (ASIC) said in an official release that the consultation on regulatory guide the 2019 Credit Licensing: responsible lending conduct (RG209) will be open for comment until 20 May of this year.

 

Last year the new Australian complaints body, the Australian Financial Complaints Authority (AFCA), recorded over 6,500 complaints last year and 45 per cent of those complaints were related to credit.

 

The credit category includes credit reporting, responsible lending, misleading product or service, and unauthorised transactions service quality.

 

This also comes just after there is serious consideration of applying responsible lending laws to ‘pay later’ services like Afterpay and the Zip Money.

 

In a last year November review of the ‘buy now pay later’ review, they wrote:

 

Buy now pay later arrangements can create some risks for consumers if they take on debt that they may have difficulty paying back. To make a scheduled repayment on a buy now pay later arrangement, some consumers delayed paying bills, became overdrawn, or borrowed money from family, friends or another loan provider.

 

The regulator had expressed concern that the 'buy now pay later' services are not obligated to comply with the National Consumer Credit Protection Act 2009 (National Credit Act) .

 

Other the buy now and pay later that were reviewed:

•    Certegy Ezi-Pay

•    Oxipay

•    BrightePay

•    Openpay

 

Responsible Lending Review

 ASIC said that the recently released guidance on responsible lending is to replace guidance that has been in place since the laws 2010, and the recent Hayne Royal Commission has been a major driver for this updated guidance.

 

Some of the key areas that they are to clarify in the guidance consultation are:

 

•    The kinds of information used to verify aspects of a consumer’s financial situation

•    The role of benchmarks is verifying the consumer’s financial situation

•    Considerations when assessing whether credit product meets consumer needs

 

The consultation paper also addresses some specific issues that the ASIC said was addressed in the original responsible lending guidance such as:

 

•    Responsible lending obligations do not apply to small businesses

•    Responsible lending mitigating loan fraud risks

•    How to use negative repayment history

•     Records to demonstrating compliance with the lending obligations

•    The purpose and content of written assent

 

“The responsible lending obligations are an integral part of the regulatory framework for all consumer loans”, ASIC Commissioner Sean Hughes said an official statement. “ASIC wants to ensure its guidance provides industry with certainty, including as a result of emerging technology and initiatives such as open banking and comprehensive credit reporting. We encourage everybody to participate in this extensive consultation process”

 

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