ASIC says the proposed responsible lending guidance is not about increasing requirements; rather, it seeks to clarify and update guidance on existing requirements.
ASIC (the Australian Securities and Investments Commission) has defended the proposed enforcement of its responsible lending guidance from the charge that it will make it harder for banks to responsibly approve loans, according to an AFR report.
ASIC issued a consultation paper in February on proposals for tougher enforcement of responsible lending rules. The paper was said to be aimed at providing greater clarity on the particular inquiries and verification steps that would be considered reasonable in lending practices.
A number of bankers, mortgage brokers and property professionals responded to the consultation, saying the proposals are impractical, anti-competitive and potentially damaging to the economy, the AFR report said.
Furthermore, they will lead to a tightening of credit to potential home borrowers and small businesses. Some have also privately claimed that ASIC’s tightening of credit is in conflict with other regulators, which are taking steps to make it easier to lend.
“Accurately verifying basic and discretionary living expenses using transactional account data is currently not feasible and in Westpac’s experience, would be of limited value,” Australia’s second largest lender said about one of ASIC’s proposals in its consultation response.
According to AFR, ASIC commissioner Sean Hughes said on Monday (8 July) that the rules governing responsible lending were only ever intended to be an “update to provide clarity for lenders”, and would not “add additional standards for them to meet”.
Echoing this stance, a statement from the CFR (Council of Financial Regulators) following a recent meeting said ASIC’s rules governing responsible lending are not about increasing requirements; but rather, clarifying and updating guidance on existing requirements.
ASIC may further clarify areas where the law does not require responsible lending requirements to be applied, such as for small business loans, it added. “The council agencies will continue to closely monitor developments in financing and the housing market.”
Earlier this month, ASIC said it plans to hold public, live-streamed hearings in August as part of a wider public consultation on its guidance on responsible lending obligations.
Those who provided written submissions to the consultation will be have an opportunity to participate in the hearings.