ASIC has issued a consultation paper to update its guidance on responsible lending in the wake of the royal commission.
ASIC’s guidance to responsible lending has been in place since 2010 when the laws were introduced.
The laws around lending have still not changed but according to ASIC, given changes in technology and the Hayne royal commission, it is an appropriate time to review the guidance.
The review will consider whether the guidance remains effective and identify changes that need to be made to the guidance to help credit licence holders better understand ASIC expectations.
ASIC has also received anecdotal feedback that licensees may be applying the responsible lending obligations where the law does not require them to be applied.
Early proposals will provide certainty to leaders who use the household expenditure benchmark that came under scrutiny during the Royal Commission as ASIC is proposing not to ban the use of such models.
ASIC Commissioner Sean Hughes said responsible lending was a fundamental part of regulation and encouraged industry stakeholders to participate in the consultation.
“The responsible lending obligations are an integral part of the regulatory framework for all consumer loans.
“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,” Mr Hughes said.
ASIC has proposed measures like the household expenditure are useful tools but should not be used to provide positive confirmation of a consumers' financial position and banks should ensure benchmark figures are realistic and adjustable.
ASIC is currently welcoming submissions from interested parties and wants to hear from stakeholders about other issues that are not dealt with in the consultation period.
The consultation is open for three months with late May being the deadline.
Eliot Hastie is a journalist at Momentum Media, writing primarily for its wealth and financial services platforms.
Eliot joined the team in 2018 having previously written on Real Estate Business with Momentum Media as well.
Eliot graduated from the University of Westminster, UK with a Bachelor of Arts (Journalism).
You can email him on: [email protected]
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