Regardless of whether a loan is a low or high risk case, brokers and banks still need to comply with responsible lending laws – and that doesn’t mean just a simple calculation of income minus expenses. Banks need to start taking further action to confirm whether consumers have actually made the lifestyle changes they said they would in order to afford credit.

In light of this, ASIC has released updated guidance that includes detailed and specific examples that lenders may encounter. Whilst the document does not prescribe what needs to be done in every case, it does show what actions a lender might take in particular circumstances in order to meet their responsible lending obligations. For example, if a consumer says that they’ll give up their subscriptions to afford a small loan, lenders may request a cancellation letter from one of their streaming services.

The responsible lending obligations are intended to strike a balance between minimising the incidence of consumers entering unsuitable credit contracts, and maximising access to credit for those who have the desire and ability to service it, which is a desirable outcome for all.