Commonwealth and NSW legislation prohibit discrimination on the basis of age. However, age can be considered as part of responsible lending.
Broadly, the legislation:
- states that it is unlawful to discriminate against provision of services based on age; and
- permits refusal to offer credit if the refusal is based on actuarial, statistical data etc
Lenders are prohibited from rejecting a loan application based on age alone. However, age is a consideration that can be taken into account when assessing whether a loan is unsuitable.
The NCCP Act requires lenders and brokers to consider not only a customer’s financial position, but also a customer’s requirements and objectives.
If enquiries reveal that the customer will be unable to meet repayments without substantial hardship after the customer’s likely retirement age, the loan will be unsuitable and can be rejected. This is not discrimination because of age, but rather using age as a consideration when assessing serviceability.
RG209 provides a useful example in 209.15.
A female consumer applying for a 25-year principal and interest home loan to purchase a new home is currently employed and can demonstrate capacity to meet repayments under the proposed loan however, she is 55 years old and intends to retire at age 65, with a post-retirement income insufficient to meet repayment obligations without substantial hardship. As it is likely the consumer could only meet her financial obligations post retirement by selling the home, it appears at first view that the presumption in s118(3) applies and, as a result, the loan would be unsuitable.
The lender’s inquiries about her requirements and objectives, however, reveal that she has planned for her future change in financial circumstances and, at the point that she can no longer comfortably afford repayments, intends to sell the home and downsize. She does not wish to purchase a smaller home until this time, however, and also considers the home she is currently purchasing has greater potential to appreciate in value in the years before she has to sell it. Given her expressed intent, if her likely equity position will be such that she can readily pay the outstanding balance of the loan at the time of the planned sale, it is reasonable to assess the loan as ‘not unsuitable’.
Reliance on statistical or actuarial data
As noted above, lenders can rely on actuarial or statistical data concerning age. For example, if statistical data indicates that most individuals retire at age 67, lenders can rely on this statistical data to assess serviceability.
A record must be kept of the source of any statistical or actuarial data used. The Federal Age Discrimination Commission may require the disclosure of this data.
Direct discrimination is where a lender rejects a loan application because the consumer is a certain age. Indirect discrimination is more subtle. For example, indirect age discrimination will occur if a lender has a policy to only lend to customers with 25 years working life left.
In this context, it’s important to remember s179(7) of the NCCP Act. This section provides that if a lender provides an unsuitable loan when a reverse mortgage would have been suitable and available from that particular lender or any other lender, the borrower can apply to court for an order to allow the borrower to remain in their principal place of residence. This would prevent the lender from exercising power of sale.
Age Discrimination Act (Cth) 2004
37(4) This Part does not make it unlawful for a person to discriminate against another person, on the ground of the other person’s age:
- in respect of the terms or conditions on which credit is provided to, or may be obtained by, the other person; or
- by refusing to offer credit to the other person;
if the condition in subsection (5) is satisfied.
37(5) The condition is satisfied if the discrimination:
- is based upon actuarial or statistical data on which it is reasonable for the first‑mentioned person to rely; and
- is reasonable having regard to the matter of the data.
Note: The Commission and the President can require the disclosure of the source of the actuarial or statistical data (see section 54).
Anti–Discrimination Act (NSW) 1977 (other states and territories appear not to have similar legislation)
49ZYU Credit applications
Nothing in this Part renders unlawful discrimination against a person on the ground of age with respect to the criteria on which an application for credit is assessed or the terms on which credit is offered or may be obtained if:
- those criteria or terms:
- are based on actuarial or statistical data from a source on which it is reasonable to rely or, if there are no such data, on such other data as may be available, and
- are reasonable having regard to the data and any other relevant factors, and
- the sources on which the data are based and those relevant factors (if any) are disclosed to the Tribunal, if the Tribunal so requires.