Playing by responsible lending rules

It’s hard to say no to extra dough in your bank account, but beware – the wrong loans might land you in a world of hurt. To help protect consumers, there are some rules in place to limit just how much damage going with the wrong lender can do.

What's in this guide?


Like suspiciously cheap rental advertisements or robot vacuums, some loans are just too good to be true. They might seem like a good idea on the surface, but dig a little deeper and you might discover some nasty surprises.

Thankfully, consumers are protected by responsible lending laws. This might sound super boring like that fine print you stare at for a total of two seconds before agreeing to it. But there's a reason we're using a regular-sized font here – these regulations exist to keep you and your money safe.

Q1: What is responsible lending?

Irresponsible lending happens when people are given loans that they can’t reasonably repay. This usually occurs because lenders haven’t done their homework.

Responsible lending is – you guessed it! – the opposite of that. The good news is that the government is pretty clear about what lenders need to tick off before hitting the approve button and handing over the funds.

They need to be certain that the loan is suitable, that the consumer can repay without substantial hardship, and that the loan meets a customer’s requirements and objectives. 

They’ll ask you a bunch of questions during the application process, and do some digging through your records to verify your eligibility. This may include things like proof of employment, recent payslips, bank statements and a peek at your credit reports.

Q2: Who makes the rules?

The Australian Securities and Investments Commission ASIC is the independent government body responsible for enforcing the law and making sure lenders follow the rules.  

Q3: Is every lender a responsible lender?

Unfortunately, not all loan providers are responsible lenders. 

When people are vulnerable or unable to get approved for a loan because of their credit score, they can sometimes turn to ‘payday’ lenders who are known for performing little to no background checks. The catch is astronomical late fees and interest rates that can linger in the twenties and above. 

These agreements can bury consumers in debt, impacting much more than their bank balance for years. The risk of default and bankruptcy, and the stress of getting out from under a bad loan can affect personal and professional relationships, mental health and more. 

If you or somebody you know is in financial trouble resulting from an unethical loan, call on your own behalf or refer them to the National Debt Hotline on 1800 007 007.

Joanne, Chief Operating Officer

Q4: What are the responsible lending laws in Australia?

Remember the big, bad GFC? It was caused in part by irresponsible lending practices.

Banks and other lenders were dishing out loans like they were going out of fashion without properly considering their viability. In response, the Australian government introduced the National Consumer Credit Protection Act NCCP

These rules include:

  • Lenders must verify an applicant’s need for the loan
  • Lenders must verify the accuracy of an applicant’s reported information
  • The loan must suit the applicant’s needs
  • Applicants must receive a written copy of the assessment

But things are always changing. The economic crisis brought on by COVID-19 plunged Australia into its first recession since 1991 – which was so long ago that The Simpsons had just debuted! As part of its economic recovery plan, the government has once again made some changes to responsible lending laws.  

Part of those changes is a greater responsibility on applicants to supply accurate information about their financial circumstances and needs. However, a potential benefit of this may be faster loan approvals.

Q5: How do responsible lending laws affect my loan application?

Responsible lending laws can make your loan application harder, but they do protect you from entering an agreement you might end up regretting.

When you apply for a loan, lenders will ask a bunch of questions about your income, your assets, your debts and your credit history. Digging through your old payslips and receipt boxes to answer them accurately is a total pain in the butt, but it allows lenders to be sure that you’re in good shape to honour your repayments, even if something goes wrong.

Wisr's commitment to responsible lending

Wisr is committed to responsible lending. Our customers' wellbeing always comes first, and that’s something that will never change.

Learn more about our borrowing options and what we do to make sure you're getting an appropriate loan. Get in touch today and let's chat through what makes sense for you. 

This guide was last updated on April 20, 2022.

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Disclaimer: This article contains general information only, and is not general advice or personal advice. Wisr Services does not recommend any product or service discussed in this article. You must get your own financial, taxation, or legal advice, and understand any risks before considering whether a product or service discussed in this article may be appropriate for you. We have taken reasonable efforts to ensure that the information is accurate at the time of publishing, but the information is subject to change. We may not update the article to reflect any change.

Joanne is a respected leader of multiple disciplines within Banking, with 17+ years’ experience ranging from credit risk, product management, pricing, analytics and strategic project delivery.

Joanne, Chief Operating Officer

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