Brokers will have to take extra precaution to verify clients' details following an ASIC regulatory update.
ASIC has updated its guidance for credit licensees following a Federal Court decision that saw a lender taken to task over verifying clients' living expenses. The regulator has updated RG 209 to reflect the Federal Court's ruling in ASIC's case against The Cash Store.
The ruling found that lender The Cash Store - now in liquidation - and loan funder Assistive Finance Australia had failed to comply with responsible lending obligations. ASIC said many of the companies' clients were on low incomes or in receipt of Centrelink benefits.
"The Federal Court's decision makes it clear credit licensees must, at a minimum, inquire about the consumer's current income and living expenses to comply with the responsible lending obligations. Further inquiries may be needed depending on the circumstances of the particular consumer," ASIC said in a release.
ASIC said it has updated RG 209 to reflect the findings of the Federal Court, as well as to make it clear that credit licensees "cannot rely solely on benchmark living expense figures rather than taking separate steps to inquire into borrowers’ actual living expenses".
"The responsible lending obligations provide an important protection for consumers. It is vital that credit licensees regularly review their processes to ensure compliance with their obligations," ASIC deputy chairman Peter Kell said.