ASIC has attempted to address growing confusion surrounding certain aspects of the National Consumer Credit Protection Act (NCCP) – particularly areas that concern older borrowers.
In the updated Regulatory Guide 209, ASIC provides further guidance and clarity on assessing borrowers' capacity to repay under the responsible lending requirements.
ASIC Commissioner Peter Boxall said the industry regulator was concerned by reports of older borrowers whose employment will reduce, or cease, before the end of the loan term, being refused loans because some lenders are adopting an unnecessarily restrictive approach to meeting the responsible lending requirements.
“Undertaking the range of enquiries required by the legislation will often reveal other ways that they will be able to repay the loan,” he said.
“The new responsible lending requirements in the National Credit Act are an important protection for consumers, but they should not be an inflexible barrier to credit for any segment of the population, and should not prevent consumers obtaining credit that they can reasonably afford.”
The changes that ASIC has made include:
• clarifying that a conclusion of substantial hardship (where a borrower appears to have no obvious continued income stream for the full life of the credit contract) can often be rebutted with reasonable enquiries about the borrower's financial situation,
• providing further guidance on issues a lender should consider when assessing the relevance of income from a person - other than the borrower - in assessing the borrower's capacity to repay.