Adelaide Bank - It's Personal

Responsible Lending

Responsible Lending regulations are in place to protect borrowers.

Doing the right thing by a customer while complying with a lender’s credit policy is not enough in the current regulatory environment. The reasons for your choices and decisions must be documented clearly in your application.

Lending decisions and broker recommendations are open to challenge up to seven years after loan origination. Failure to meet Responsible Lending requirements can result in significant penalties to lenders and brokers.

Information documented as part of a loan application is the primary defence against allegations of inappropriate conduct. So providing accurate file notes of your conversations with borrowers as part of your loan application is an absolute must.

We require such documentation to be provided with your applications, not only to meet our obligations as a lending institution, but also to protect the professional reputation and future of our broker partners.

Your obligations
Put simply, the file notes in your loan applications need to show that you’ve:

  • made reasonable inquiries about a borrower’s financial situation, objectives and product requirements
  • taken reasonable steps to verify a consumer’s financial situation
  • suggested a loan that is not unsuitable for a borrower’s purpose and objectives.

When to delve deeper
While we can’t list all scenarios, here are some tell-tale signs that an application requires further (documented!) enquiry:

  • Loan to Income Ratio is high (e.g. over 5 times)
  • Limited savings history
  • Percentage of borrower's income used to service loan is over 35%
  • Declared Living Expenses appear low
  • Loan term exceeds borrower's working life or retirement expectations
  • Discretionary income/savings will be minimal after loan settlement
  • Borrower wants an interest only loan for an owner-occupied property
  • Product complexity - e.g. fixed rate or interest only loans.

More information on your obligations can be found in our Responsible Lending Guidelines or please contact your local BDM.

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