On 5 November 2014, ASIC released a revised Regulatory Guide 209 (RG209).
Aside from the minor wording and reference number updates, RG209 has been enhanced to better describe ASIC’s expectations of how a licensee can meet its obligations to make reasonable inquiries into a borrower’s requirements and objectives, and income and expenses.
Excerpts from the recent ASIC v Cash Store (in liquidation) case are now included as the only case testing the ‘reasonable inquiries’ requirement.
RG209 now clearly states that a licensee:
- must make reasonable inquiries into the particular consumer’s actual income, expenses, and other circumstances that are likely to impact the consumer’s ability to repay (RG209.30);
- must find out sufficient details about why the particular consumer requires a loan or a lease so as to determine whether the credit contract or lease will meet the consumer’s requirements and objectives (RG209.34); and
- may only use sophisticated tools and benchmarking to test the reliability of the actual information given by the consumer (RG209.49 and RG209.105) rather than as a substitute for making inquiries about the consumer’s financial situation.
This latest guidance should be carefully considered by licensees using heavily automated application and decisioning systems. If these kinds of systems and tools are used, licensees need to ensure that they are adequate and appropriate and that their use is regularly monitored and reviewed to ensure their continued effectiveness.
There is additional specific guidance in the amended RG applicable to small amount (SACC) lenders.