Responsible Lending

The NCCR Act requires that all registrants and licensee and their representatives adhere to a range of specific conduct obligations relevant to responsible lending. Broadly, these responsible lending conduct obligations set in place the expected standards of behavior for those engaging in credit activities with consumers.

There are different commencement dates for some obligations dependent upon whether the registrant or licensee is an Authorised Deposit-Taking Institution (ADI).

The objective of the responsible lending obligations is to ensure that a broker or lender or other industry participant does not:

• Enter into credit contract or consumer lease with a consumer
• Suggest a credit contract or consumer lease to a consumer; or
• Assist a consumer to apply for a new credit contact or consumer lease or an increase in an existing credit contract if the credit contract or consumer lease is “unsuitable”

Asic recommend that there are three steps required to meet these responsible lending obligations:

• Making reasonable inquires about the consumers financial situation, requirements and objectives;
• Taking reasonable steps to verify the consumers financial situation; and
• Making preliminary assessment (for credit assistance providers such as brokers) or final assessment (for credit providers such as lenders) as to whether the credit contract or consumer lease is ‘not unsuitable ‘for the consumer based on the information from the first two steps.

These activities must be undertaken before an application for a particular credit product with  Paramount (or a particular consumer lease with a particular lessor) is commenced.

To whom do responsible lending obligations apply and from when?

Responsible lending obligations apply to registrants, licensees and their representatives (whether credit providers or credit assistance providers). Registrants and licensees are responsible for ensuring that they and their representatives take appropriate actions to meet these obligations

Asic have recognised in their Regulatory Guide 209: Credit licensing: Responsible lending obligations that the obligations of credit providers (such as lenders) and credit assistance providers (such as brokers or lenders dealing directly with consumers) may at times differ.

For Authorised Deposit - Taking institutions (ADIs) such as banks, the responsible lending obligations apply from 1 January 2011. For non – ADIs, such as brokers, there is a two stage commencement of these obligations – ‘Phase Two’ (disclosure) from 1 January 2011.

For a registrant or licensee that provides credit assistance (such as a broker), the responsible lending obligations apply when they:

• Suggest or assist with, or provide a new credit contract or consumer lease;
• Suggest or assist with or increase the limit on a particular credit contract; or
• Suggest a consumer remain in a particular credit contract or consumer lease.