ASIC has updated Regulatory Guide 209 Credit licensing: Responsible lending conduct (RG 209) for credit licensees on their responsible lending obligations.

The updated guidance reflects:
•the ASIC v The Cash Store decision (discussed here)
•changes to statutory restrictions on charges for small amount credit contracts, and
•clarification of existing guidance, and removal of some material that ASIC considers to be repetitive or no longer necessary.

The principal changes to RG 209 relate to what are reasonable inquiries about a consumer’s financial situation and requirements and objectives: RG 209.30-37.

There is no change to ASIC’s position on scalability: ASIC considers “that the obligation to make reasonable inquiries and take reasonable steps to verify information is scalable—that is, what you need to do to meet these obligations in relation to a particular consumer will vary depending on the circumstances.”

ASIC has also made extensive comments about the use of benchmarks in measuring expenses: “Use of benchmarks is not a replacement for making inquiries about a particular consumer’s current income and expenses, nor a replacement for an assessment based on that consumer’s verified income and expenses.”: RG 209.105.

The Australian Prudential Regulation Authority (APRA) has also released prudential practice guide APG 223 Residential mortgage lending on sound risk management practices for residential mortgage lending (discussed here).

Credit providers should consider both sets of guidance when engaging in home lending.