AFCA’s Approach to Responsible Lending

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Original media release from AFCA (15/12/2023).

The Australian Financial Complaints Authority (AFCA) has published its Responsible Lending Approach, documenting for financial firms and consumers the way it considers complaints in this area.

The Approach was developed in response to calls from stakeholders to provide greater clarity around AFCA’s existing approach and to ensure consistency in AFCA complaint outcomes in these complex areas.  

Responsible lending covers activities such as home lending, small amount credit contracts, credit cards, car loans, consumer leases and personal loans.

The Approach is not new – it does not change or create new requirements – but it will help complainants and financial firms better understand how AFCA reaches decisions.

The Approach aligns with ASIC’s regulatory guidance and the responsible lending laws. It was drafted with the support of advice from experienced Senior Counsel.

The Approach was finalised after significant input from financial firms, industry bodies, regulators and consumer groups during the consultation process. “We thank our stakeholders for their valuable input during what was an extensive consultation,” Lead Ombudsman Natalie Cameron said.

The Approach explains how AFCA considers responsible lending complaints, including:

  • how it assesses a financial firm’s compliance with responsible lending obligations
  • how it determines a fair outcome where a financial firm breaches its responsible lending obligations, and
  • how it calculates loss and assesses benefits to determine fair compensation

It outlines how AFCA applies legal principles, industry codes, regulatory guidance and considers good industry practice and principles of fairness when investigating responsible lending complaints.

The Approach is among a suite of approaches, on various topics, published on the AFCA website here.

The Appropriate Lending to Small Business Approach document has also now been finalised and will be published, alongside a Consultation Feedback Report, in early 2024.