Lenders fail to meet their responsible lending obligations because of a number of common mistakes in assessing loan applications, said the Financial Ombudsman Service in a new guide to responsible lending which lists the mistakes.The National Consumer Credit Protection Act requires that before a lender offers to enter into a credit contract with a consumer it should make reasonable inquiries and take reasonable steps to check the consumer's information in their loan application.The lender is also required to assess whether the loan contract will be suitable for the borrower. A loan is unsuitable if it does not meet the borrower's requirement and objectives, and if the borrower cannot repay the loan without substantial hardship.The FOS guide outlines its approach to dealing with responsible lending disputes.FOS said: "When a borrower cannot make their loan repayments they sometimes say that their lender should not have given them the loan because they never had the ability to repay it. They may lodge a claim for compensation."Common errors by lenders include relying on a source of income that has restrictions on how it can be used, such as child maintenance payments (which should be used only for the child's expenses).Another common mistake is calculating the applicant's income from a single pay period, even when it is inconsistent with year-to-date figures, or does not discount income from overtime or commission payments.Some lenders fail to verify the applicant's rental income or discount it for vacant periods.When considering expenses, some lenders look only at the applicant's current credit card balances, rather than the credit card limits. They may also fail to determine whether the applicant has dependents.And some lenders overlook information about other debts or fail to take the age of the applicants into consideration.FOS can consider a responsible lending dispute where the borrower's claim for loss is less then $500,000. It can award compensation up to $280,000. FOS's power does not depend on the amount of credit provided under the contract.FOS will also consider disputes where a guarantor is seeking to be released from their guarantee. It will consider claims involving brokers, such as where a borrower claims that a broker changed figures in a loan application form or provided false information. Liability for a broker's failure to meet its responsible lending obligations may fall on the lender if FOS finds that the broker was the lender's agent, rather than the consumer's.FOS looks at whether the consumer took reasonable care to protect their interests. Some consumers sign incomplete or blank loan application forms.To assess loss, FOS considers the position the consumer was in before the loan was granted and how the funds were used. For example, if the borrower used the funds to refinance an existing debt they may not have suffered any loss. If the borrower used to loan to buy an asset FOS requires the asset to be sold so that any loss can be calculated.When a consumer applies for a low-doc loan, instead of providing pay slips or tax returns to verify income