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ASIC forces bank to change lending practices

by Staff Reporter4 minute read
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Bank of Queensland has changed its lending practices following concern from ASIC about the way it assessed applications for home loans.

The regulator said it was concerned that Bank of Queensland was using a benchmark figure, the Henderson Poverty Index, to estimate the living expenses of consumers applying for home loans, rather than asking borrowers about their actual expenses.

ASIC said this lack of inquiry about actual expenses was not consistent with responsible lending obligations imposed by the National Credit Act.

“Bank of Queensland has updated its home loan application forms to obtain more information about a customer's living expenses,” according to ASIC.

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“The bank will carry out an assessment of the suitability of a loan using the higher of either the living expense figure supplied by the customer or an appropriate benchmark figure.”

ASIC noted that the bank will continue to review the circumstances of borrowers who go into hardship or default to ensure they have not been disadvantaged by a loan provided before the change in policy.

Deputy chair Peter Kell said this outcome is part of ASIC’s ongoing focus on the lending industry’s compliance with responsible lending laws.

“Lenders must carry out inquiries to determine whether a credit contract will be unsuitable for a consumer,” he said.

“Using benchmark figures such as the Henderson Poverty Index alone to estimate a consumer's financial position is not sufficient to meet this requirement.”

ASIC updated its responsible lending guidelines in November to clarify that credit licensees cannot rely solely on benchmark living expense figures, and must also make inquiries about the borrowers’ actual living expenses.

The regulator acknowledged the cooperation of Bank of Queensland in resolving this issue.

[Related: Loan fraud on ASIC's radar]

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