Glossary
Responsible lending obligations
Responsible lending obligations require licensed lenders and brokers to make reasonable inquiries, verify a consumer's financial situation and assess that a regulated loan is not unsuitable before providing or arranging it.
An example
Before offering a regulated loan, a lender asks for payslips, bank statements and details of expenses, and records why it concluded the loan meets the borrower's requirements and can be repaid.
Why it matters
These obligations protect consumers from loans they cannot repay without substantial hardship. They generally do not apply to business-purpose lending, which is why the purpose of a loan matters.
Points to check
These obligations apply to regulated consumer credit, not to most business-purpose loans. If your loan is regulated, expect the lender or broker to ask about your income, expenses and objectives, and to verify what you tell them. Be honest and complete in what you provide. If you believe a regulated loan was provided without proper inquiries, you may be able to complain to the lender and then to AFCA.
Related terms
Further reading: ASIC Moneysmart