Many credit assistance providers offering debt consolidation services are at risk of failing to meet their compliance obligations because of poor risk assessment practices and lax record-keeping.Yesterday, the Australian Securities and Investments Commission released the results of a review of credit assistance providers' responsible lending conduct in relation to debt consolidation. It warned them they need to review their procedures.ASIC's view is that debt consolidation is presented as a way of solving debt problems and saving money but carries a number of risks. Debt consolidation is the practice of securing new or additional credit to pay off existing credit contracts. The most common debt consolidation strategies are extending the term on an existing loan, switching to an interest-only loan (both of these approaches reduce monthly repayments) and taking out a new loan with a different interest rate.ASIC said the risks include: the higher overall cost involved in extending a loan term; setting up a new loan but leaving existing credit contracts open (this enables a consumer to draw on them later); transferring default risk on unsecured loans and loans secured by small assets, such as a car, to the family home, by consolidating all debts into the mortgage; and moving a consumer into an interest-only loan, to reduce repayments, but not putting a pay-out plan in place.Licensees offering debt consolidation services must meet the responsible lending obligations of the National Credit Act.ASIC said: "We found that credit assistance providers did not appear to document in their client file whether potential significant risks and costs of debt consolidation had been discussed with consumers."Only a few credit licensees demonstrated that they recorded appropriate details in all their files."It found plenty of evidence of poor record-keeping. In 30 per cent of files, ASIC found it was unable to make a comparison between the consumer's pre-consolidation position and their post-consolidation position.It also found files where there was no record of the client's requirements and objectives. And in others there was insufficient documentation to show that the provider had undertaken adequate inquiries ASIC also said there was room for improvement when it came to making adequate inquiries, as well as the verification of the customer's financial situation or existing credit contracts to satisfy the responsible lending obligations. In some cases, credit assessments were also being made using lower credit amounts and interest rates than those set out in credit applications.