ASIC probe forces non-major to improve lending standards

by Julia Corderoy26 May 2015
Bank of Queensland has made improvements to its lending practices, following ASIC's concerns about the way it assessed applications for home loans.

ASIC was concerned that the non-major was using a benchmark figure, the Henderson Poverty Index (HPI), to estimate the living expenses of consumers applying for home loans, rather than asking borrowers about their actual expenses.

In ASIC's view, the lack of enquiry about actual expenses, and reliance solely on HPI – which  is used as a measure for estimating the minimum amount of money families of different sizes need to cover basic essential needs – was not consistent with responsible lending obligations imposed by the National Credit Act.

Bank of Queensland has now updated its home loan application forms to obtain more information about a customer's living expenses. The bank will now have to carry out an assessment of the suitability of a loan using the higher of either the living expense figure supplied by the customer or an appropriate benchmark figure.

“This outcome is part of ASIC’s ongoing focus on the lending industry’s compliance with responsible lending laws,” ASIC deputy chairman Peter Kell said.

“Lenders must carry out inquiries to determine whether a credit contract will be unsuitable for a consumer. Using benchmark figures such as the Henderson Poverty Index alone to estimate a consumer's financial position is not sufficient to meet this requirement.”

ASIC also noted that the bank will continue to review the circumstances of borrowers who go into hardship or default to ensure that they have not been disadvantaged by a loan provided prior to the change in policy.

In November 2014, ASIC updated Regulatory Guide 209 Credit licensing: Responsible lending conduct (RG 209) to clarify that credit licensees cannot rely solely on benchmark living expense figures, and must also make inquiries about the borrowers’ actual living expenses.


  • by Maria Rigoni 26/05/2015 9:39:41 AM

    ASIC doesn't get the NCCP which requires "reasonable" inquiry to assess if the borrower will be unable to comply, or could only comply with substantial hardship with the consumer's financial obligations in taking out the loan.
    Any reasonable person understands when making a financial commitment to repay a loan a person's living expenses will not be the same after the loan settles.
    If ASIC wants actual living expenses why do lenders need to add an assessment margin to the interest rate?
    A more sensible approach is to discuss the repayment amount - is that affordable to the borrower?
    What ASIC is doing in this interference is making it harder for responsible borrowers to access loans at an affordable price from responsible lenders.

  • by lol 26/05/2015 9:47:14 AM

    And only 1 in 20 people even have a clue what their monthly expenses are....which hasn't changed from 20 years ago.

  • by george 26/05/2015 6:52:53 PM

    Asic are doing their job. I lost my home the same way.