The Australian Securities & Investments Commission (ASIC) has updated its guidance surrounding responsible lending rules for the first time in five years. The National Credit Laws provide consumers with important protections when seeking credit directly from a lender or through a broker, and the updated guidelines are expected to provide more protection for property buyers.
ASIC Commissioner Sean Hughes said ASIC conducted extensive consultation on this issue. The aim of the new guidelines is to stop banks/finance companies giving consumers unsustainable debt. This will happen by requiring these lenders to obtain current, reliable and sufficient evidence and information about a customer’s current financial position.
The plus for property buyers is that financial institutions will do a lot more due diligence on finance applications. Of course this in itself is problematic as it will require property buyers to jump through a heap more hoops before they can get finance approval, making buying a property quite a bit more complicated and time consuming.
Australian Banking Association chief executive Anna Bligh said the updated rules would provide clarity to banks on ASIC’s views on what responsible lending obligations require before offering credit to customers.
“This is an important document for the industry to guide each bank’s approach to responsible lending which we will now study closely to assess any impacts it may have on borrowing for customers,” Ms Bligh said.
“The industry is pleased to see ASIC has maintained a principles based approach to lending, which as an industry we have called for, and to ensure banks are able to fulfil their obligations without the process becoming too restrictive for customers,” she said.
So what does this mean to you?
Our advise is to do your home work and get all of your financial affairs in order before you start visiting Banks or other lenders. This may mean simple taking the time to write everything pertaining to your income and expenses, and your assets and liabilities into a simple word document. Going through the process of what you own, what you owe, what you earn and what you spend, will clarify in your own mind the state of your financial affairs and will start getting you ready for the questions potential lenders will ask you.