ASIC has updated its guidance on responsible lending obligations for credit licensees in a move it said reflected a Federal Court decision in August against The Cash Store (now in liquidation).
The court ruled that the company had failed to comply with its responsible lending obligations in relation to their customers, the majority of whom were on low incomes or in receipt of Centrelink benefits.
"The Federal Court's decision makes it clear credit licensees must, at a minimum, inquire about the consumer's current income and living expenses to comply with the responsible lending obligations," ASIC said in a media statement.
The updated guidance also reflects:
- changes to statutory restrictions on charges for small amount credit contracts, and
- clarification of existing guidance, and removal of content that is repetitive or no longer necessary.
The Australian Prudential Regulation Authority has also released final guidance for authorised deposit-taking institutions on sound risk management practices for residential mortgage lending.
"Credit providers should consider both sets of guidance when engaging in home lending," ASIC warned.