Responsible lending compliance: A “common sense” approach
Date of this Version
In the wake of the July 2013 Enhancements to the National Consumer Credit Protection Act it has been necessary for credit providers to review and update their responsible lending processes. A year later, it is timely to assess whether enough has been done, and to consider if lenders are compliant. Inevitably, some grey areas exist under the new law which lenders need to deal with, and this paper will address some of those issues. Responsible lending is not a new phenomenon. It has been in place for consumer credit loans for some time; however, the recent enhancements required a revision of responsible lending practices and implementation by mid 2013. Some uncertainties have arisen in respect of the true nature of “reasonable” enquiries during this period, and these issues will be examined in the course of this discussion. This paper proposes that most of the requirements rely on a “common sense” approach, and incorporate steps that any prudent credit provider would implement in any event, in order to protect and grow their business. But as not everything is clear-cut under the credit legislation, this paper also aims to provide a practical approach to understanding problematic provisions.