Bundaberg-based building society Wide Bay Australia will improve its responsible lending practices following ASIC concerns with the way the group was assessing its customers' suitability for home loans.
ASIC's concerns with Wide Bay followed a restructure of its customers' home loans undertaken in 2013 which was initiated by third party broker, FTS Finance Brokers. FTS Finance Brokers is owned by FTS Securities, in which Wide Bay holds an equity stake.
ASIC was concerned that Wide Bay relied too heavily on limited information provided by FTS Finance Brokers, rather than checking directly with the borrower about their requirements and objectives.
Wide Bay will be now be updating their application forms to ensure they capture relevant information about a borrower's requirements and objectives, as well as improving their processes when insufficient or inconsistent information is provided.
The outcome is part of ASIC's wider focus on the lending industry's compliance with responsible lending laws.
“Lenders are fully responsible for ensuring a loan is suitable for a borrower. Having robust compliance systems is vital in ensuring customers are protected,” ASIC Deputy Chairman, Peter Kell
The crackdown on responsible lending laws also follows a number of developments which has reinforced the importance of the national credit laws.
In August 2014, the Federal Court handed down a landmark decision on responsible lending obligations, making it clear credit licensees must, at a minimum, inquire about the consumer's current income and living expenses.
In response, ASIC updated Regulatory Guide 209 Credit licensing: Responsible lending conduct
(RG 209) in November to incorporate the general findings of the Court on the responsible lending obligations for credit licensees.
In December, ASIC announced it would conduct surveillance into banks and non-bank lenders' provision of interest-only loans as a part of its focus on responsible lending obligations.