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New responsible lending code applies to banks too
Media release – 11 June 2015
New responsible lending code applies to banks too
The Banking Ombudsman Scheme has published a Quick Guide explaining how new responsible lending requirements and changes to hardship applications affect banking.
Lending-related complaints the scheme investigates often involve contracts for credit such as mortgages, credit cards, arranged overdrafts and personal loans. The credit contract legislation now includes specific responsible lending obligations, and different rules for unforeseen hardship applications.
“Though the new Code of Responsible Lending and its principles were developed to deal with problem lenders, they also apply to banks. This makes it easier for customers as there is only one set of requirements for all lenders.
“Banks previously adhered to general responsibility principles in the Code of Banking Practice and complaints to the Banking Ombudsman scheme were rare.
“The recent law changes, however, make these obligations more explicit and require lenders to be able to show that they have adhered to their obligations. This should make investigating complaints about irresponsible lending more efficient.
“Lenders are also now required to provide customers with key information before contracts are signed to ensure customers are fully informed of what they are committing to. This will make it easier for customers to compare different offers and assess their own ability to repay.
“Changes to hardship rules also spell out what’s required of both the lender and customer if the customer unexpectedly finds themselves in financial hardship and applies for hardship assistance,” Banking Ombudsman Deborah Battell said.
The Quick Guide to How credit law changes affect banking outlines:
• the main changes affecting banking
• how responsible lending is dealt with
• changes to the hardship application criteria.
See also our Quick Guide on Concerns about lending decisions and Quick Guide on Hardship and Financial Difficulty.
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