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Banks, advisors and brokers will have to assess whether or not a product is suitable before providing the credit product, under the responsible lending obligations released by the ASIC yesterday.
ASIC released its policy proposals as part of its extensive consultation process for its proposed National Consumer Credit Protection Program.
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“We think the obligation to make reasonable inquiries is scalable,” ASIC said yesterday.
“Scalable means that the obligation varies depending on the circumstances including the potential impact on the consumer of entering into an unsuitable credit contract, the complexity of the credit contract and the objectives and financial literacy of the client.”
The shake-up of consumer protection forms part of the federal takeover of credit, which takes effect for brokers and some lenders from January.
The key obligation is that credit licensees must not suggest, assist with or provide a credit product that is unsuitable for a consumer.
According to ASIC, a licensee must make reasonable inquiries about a consumer’s financial situation and their requirements; assess whether or not a credit product is suitable; and give the consumer a copy of the assessment if required.
