Responsible Lending in Australia: What Lenders Are Required to Do

Applying for credit can involve more than entering your personal details and waiting for a decision.

You may be asked about your income, expenses, existing debts and why you want to borrow. You may also need to provide documents or access to financial information that helps confirm what you have told the provider.

These questions are not simply administrative. For regulated consumer credit, they help the provider assess whether the proposed credit contract is suitable for your circumstances.

In this guide, we explain what responsible lending means in Australia, what information lenders may consider and what you should review before accepting credit.

What Is Responsible Lending in Australia?

Responsible lending refers to legal obligations intended to reduce the risk of consumers entering credit contracts that do not meet their needs or that they cannot repay without substantial hardship.

Chapter 3 of the National Consumer Credit Protection Act 2009 contains Australia’s responsible lending conduct requirements. ASIC’s Regulatory Guide 209 explains how credit providers and credit assistance providers can approach these obligations.

In broad terms, a regulated provider may need to:

• Ask about your financial situation.

• Ask what you need the credit for and what you expect from it.

• Take reasonable steps to verify your financial situation.

• Assess whether the proposed credit contract is unsuitable.

• Avoid providing, suggesting or assisting with an unsuitable contract.

The amount of information required can vary. The provider may consider the type and amount of credit, the length of the contract, your circumstances and the information already available.

What Are Lenders Required to Ask About?

A responsible lending assessment generally considers two main areas:

1. Your financial situation.

2. Your requirements and objectives.

ASIC explains that regulated providers must make reasonable inquiries about both areas and take reasonable steps to verify the consumer’s financial situation.

Your Financial Situation

A lender may ask about matters such as:

• Your employment and income.

• Regular household and living expenses.

• Rent or mortgage payments.

• Existing loans and credit card commitments.

• Buy now, pay later arrangements.

• Dependants.

• Recurring financial obligations.

• Foreseeable changes that could affect your ability to repay.

The aim is to develop a reasonable understanding of the money coming into and going out of your household.

Your income alone does not necessarily show whether repayments will be manageable. Two people earning the same amount may have very different housing, childcare, medical or debt-related costs.

Your Requirements and Objectives

A lender or broker may also ask:

• How much you want to borrow.

• What you intend to use the money for.

• How long you expect to take to repay it.

• Whether you need particular product features.

• Whether the proposed repayment arrangement meets your needs.

These questions help the provider assess whether the product is appropriate for what you are trying to achieve.

A product might appear affordable based on the numbers but still fail to meet your stated purpose, preferred repayment period or other important requirements.

What Information May a Lender Verify?

A regulated provider should not rely blindly on every figure entered into an application.

ASIC’s guidance states that providers must take reasonable steps to verify a consumer’s financial situation. The appropriate steps will depend on the product, the circumstances and the reliability of the information available.

Verification may involve reviewing:

• Payslips.

• Bank transaction information.

• Employment details.

• Centrelink income statements.

• Loan or credit card statements.

• Existing credit commitments.

• Information held by credit reporting bodies.

• Other documents supporting your income or expenses.

Verification helps confirm that the information supplied is accurate. It may also identify regular expenses or commitments that were overlooked during the application.

It is important to provide complete and accurate information. Leaving out a debt or understating an expense can prevent the provider from properly assessing your position.

What Makes a Credit Contract Unsuitable?

For regulated consumer credit, a contract must be assessed as unsuitable when it is likely that:

• You would be unable to meet the financial obligations under the contract.

• You could only meet those obligations while experiencing substantial hardship.

• The contract would not meet your requirements or objectives.

ASIC often describes the required assessment outcome as determining whether a contract is “not unsuitable”.

That wording matters.

Responsible lending is not a guarantee that a product will improve your financial position. Approval also does not mean the provider has decided that borrowing is your best possible option.

It means the provider has completed the assessment required for the relevant regulated credit activity and has not identified circumstances requiring the proposed contract to be treated as unsuitable.

What Does Substantial Hardship Mean?

Substantial hardship is not limited to being completely unable to make a repayment.

A credit product may be unsuitable when you could technically make the repayments, but only by making significant sacrifices to essential spending or taking unreasonable steps.

ASIC’s guidance explains that basic outgoings may include expenses relating to housing, food, clothing, health, education, transport and communication for you and your dependants. It also states that substantial hardship can exist even when the consumer is not completely unable to repay.

Before accepting credit, consider questions such as:

• Will I still be able to cover rent or mortgage payments?

• Can I afford food, transport, utilities and medical costs?

• Is my income likely to remain stable during the repayment period?

• Do I have other repayments due around the same time?

• Is the expense necessary, or can it be delayed?

• What would happen if another unexpected cost arose?

• Could I use savings or request a payment plan instead?

A provider’s assessment is an important consumer protection, but it does not replace your own review of the cost and the effect on your budget.

Does Responsible Lending Guarantee Approval?

No. Responsible lending does not guarantee that your application will be approved.

Even when you provide all the requested information and believe you can afford the repayments, a provider may still decline the application.

A provider may consider:

• Its eligibility requirements.

• Its internal credit policies.

• The information you supplied.

• The results of its verification process.

• Your existing financial commitments.

• The features and amount of the proposed credit.

Different providers may offer different products and apply different eligibility criteria.

Responsible lending rules are primarily designed to prevent unsuitable credit from being provided or recommended. They do not give consumers an automatic right to receive credit.

Can You Request a Copy of the Lender’s Assessment?

In many regulated credit situations, you can ask for a free written copy of the relevant assessment.

A preliminary assessment generally applies when a credit assistance provider, such as a broker, provides credit assistance. A final assessment generally applies when the credit provider makes the lending decision.

ASIC states that a consumer may request a free written copy within seven years of entering the credit contract or, for credit assistance, within seven years of the relevant quote.

Exceptions apply when the contract was not entered into, the credit limit was not increased or the credit assistance was not provided.

The assessment may help you understand the information the provider considered and why the proposed contract was assessed as not unsuitable.

What Disclosure Documents Should Consumers Receive?

Responsible lending laws also include disclosure requirements for many Australian credit licensees and credit representatives.

Depending on the provider and service, relevant documents may include:

• A credit guide.

• A quote for credit assistance fees.

• A proposal document.

• A written suitability assessment when requested.

A credit guide generally explains who the provider is, what credit activities it performs and how you can make a complaint.

A quote may explain the estimated fee charged for credit assistance. A proposal document may outline costs and remuneration connected with that assistance.

ASIC explains that the documents required depend on whether the business is a credit provider, credit assistance provider, lessor, assignee or credit representative.

Before accepting any credit offer, read the contract and supporting disclosures carefully. Pay attention to:

• Interest.

• Fees and charges.

• Repayment dates.

• The total repayment amount.

• Missed-payment consequences.

• Default terms.

• Financial hardship arrangements.

Do Responsible Lending Laws Apply to Every Financial Product?

Not every payment or financial service is regulated in exactly the same way.

The responsible lending requirements discussed in this article apply to credit licensees carrying out regulated activities under the National Credit Act. Some services may operate under modified requirements, exclusions or different regulatory frameworks.

A wage advance is not necessarily structured or regulated in the same way as a personal loan, credit card or traditional payday loan.

Rather than assuming every product operates identically, review:

• How the service works.

• The eligibility criteria.

• The applicable fees and interest.

• The repayment schedule.

• The effect on your next pay.

• The available support options.

When you access part of your income early, there will be less of that pay available later once the advance and its costs are repaid.

How Our MyPayNow Wage Advance Works

We provide a wage advance service for working Australian residents aged 18 or over who meet our eligibility criteria.

With us, eligible customers may be able to access up to a quarter of their net pay early, capped at $2,000. Your approved limit is based on the income we identify, and terms, conditions and eligibility requirements apply.

You can select from preset amounts up to your approved limit. Once you have taken an advance, you cannot request another one until your outstanding balance has been repaid in full.

An available limit should not be treated as a recommendation to access the maximum amount. Before requesting an advance, consider how the repayment will affect the money available during your next pay cycle.

What Information Do We Assess?

When you set up an account with us, we ask for information about your employment and salary so we can assess your eligibility and show you how much you may be able to access.

We also use recent bank transaction information to confirm that you are employed and receiving regular wages and to assess whether our product is suitable for you. The bank account you connect must be the account into which your salary is paid.

Our assessment may consider matters such as:

• Whether regular employment income can be identified.

• The amount and frequency of your wage.

• Whether your pay cycle is regular.

• Recent failed payments.

• Relevant activity appearing in the connected bank account.

• Whether you meet our other eligibility criteria.

Approval is not guaranteed. Meeting one eligibility requirement does not necessarily mean your application will be approved.

What Does a MyPayNow Wage Advance Cost?

Our current pricing includes:

• A fee of 5% of the amount advanced.

• Interest at 24% per annum on the outstanding balance.

• An interest period capped at 62 days.

For example, if you access $100 for seven days:

These figures are based on our current published FAQs. You should review our latest costs and terms before requesting an advance, as product information may change.

Your repayment is generally scheduled to be deducted from your nominated bank account by direct debit on or around your next scheduled payday.

Before proceeding, make sure the total repayment fits within your budget and leaves enough money for your essential expenses.

How Can You Prepare for a Lending or Affordability Assessment?

Preparing accurate information before applying can make the process clearer and help you review whether the commitment is manageable.

1. Review Your Income

Check your regular take-home income and consider whether it is likely to continue throughout the repayment period.

Do not rely on overtime, bonuses or irregular income unless you are confident they will be available when the repayment falls due.

2. Add Up Your Essential Expenses

Include regular costs such as:

• Rent or mortgage repayments.

• Groceries.

• Electricity, gas and water.

• Phone and internet.

• Insurance.

• Transport.

• Medical expenses.

• Childcare or other costs for dependants.

Use realistic amounts rather than the lowest possible estimate.

3. List Your Existing Repayments

Include:

• Personal loans.

• Credit cards.

• Buy now, pay later arrangements.

• Wage advances.

• Car finance.

• Other recurring debts or payment plans.

Small repayments can become significant when several are due during the same pay cycle.

4. Check the Total Cost

Look beyond the amount you will receive.

Review any:

• Interest.

• Establishment fees.

• Service charges.

• Account fees.

• Transaction fees.

• Missed-payment fees.

• Default costs.

Consider both the total amount and when it must be repaid.

5. Think About Upcoming Changes

Consider whether any foreseeable event could affect your budget, including:

• Reduced work hours.

• Unpaid leave.

• A change of employment.

• Moving costs.

• School expenses.

• Annual insurance or registration bills.

• Upcoming medical costs.

6. Access or Borrow Only What You Need

A higher limit does not mean using the full amount is appropriate.

Taking a smaller amount generally reduces the total cost and leaves more of your future income available for other expenses.

What Can You Do if Repayments Become Difficult?

Contact the provider as soon as you think you may have trouble making a repayment.

Acting early may give you more time to discuss available repayment or hardship options. Moneysmart recommends contacting the provider’s hardship team promptly rather than waiting for the situation to get worse.

Avoid ignoring messages or taking out additional high-cost credit simply to meet an existing repayment without first considering the longer-term effect.

If you have an advance with us and your circumstances change, contact our customer support team as soon as possible.

In some circumstances, our app may allow you to:

• Delay the repayment until your next pay cycle.

• Split the balance into two repayments across two pay cycles.

These features are subject to the applicable conditions and may not be available in every situation.

You can also seek free and independent help from a financial counsellor through the National Debt Helpline.

Responsible Lending Protects You, but Your Decision Still Matters

Responsible lending obligations form an important part of Australia’s consumer credit framework.

For regulated credit activities, providers must gather relevant information, verify financial circumstances and avoid providing or recommending unsuitable credit.

However, approval does not prove that borrowing or accessing income early is the right decision for you.

Before committing, review:

• The total cost.

• The repayment date.

• The effect on your next pay.

• Your other financial commitments.

• The alternatives available.

Depending on your circumstances, alternatives could include:

• Using available savings.

• Delaying the expense.

• Asking the business for a payment plan.

• Checking whether hardship support is available.

• Reviewing your household budget.

• Considering a No Interest Loan for an eligible essential expense.

• Speaking with a financial counsellor.

When considering a wage advance with us, review our current eligibility requirements, fees, interest and repayment information before deciding whether it is appropriate for your circumstances.

Frequently Asked Questions

What Do Lenders Check Before Approving a Loan in Australia?

A lender may review your income, expenses, existing debts, employment, credit commitments and the purpose of the loan.

For regulated consumer credit, the provider must make reasonable inquiries about your financial situation and requirements and take reasonable steps to verify relevant financial information.

Can a Lender Approve a Loan That Causes Financial Hardship?

A regulated credit provider must not enter into a credit contract that is unsuitable.

A contract may be unsuitable when you are unlikely to meet its obligations, could only meet them while experiencing substantial hardship or when the product does not meet your requirements and objectives.

Does Responsible Lending Mean the Lender Must Offer the Cheapest Product?

Not necessarily.

Responsible lending focuses on whether the proposed regulated credit contract is unsuitable. You should still compare interest, fees, features, repayment terms and alternatives before accepting a product.

Can a Lender Ask to See Bank Statements?

Yes.

Bank account or transaction information may be used to verify your income, expenses and existing financial commitments as part of a lending or affordability assessment.

Is a Wage Advance the Same as a Loan?

Not necessarily.

The product structure and legal treatment may differ. A wage advance generally allows eligible customers to access part of their expected employment income before payday, while a personal loan generally involves borrowing a separate amount under a credit contract.

Always review the specific provider’s terms, costs, eligibility requirements and repayment conditions.

What Should I Do if I Cannot Afford a Repayment?

Contact the provider promptly and ask about available repayment or hardship options.

You may also seek free, independent assistance from a financial counsellor rather than taking on another debt simply to cover the payment.

Review Your Options Before Making a Decision

Before requesting credit or accessing part of your wage early, take time to review the total cost and the effect the repayment will have on your budget.

You can learn more about how our wage advance works, review our current FAQs and check the applicable costs and eligibility requirements before deciding whether the service may be suitable for you.

Terms, conditions and eligibility criteria apply. Approval is not guaranteed.

The information provided in this blog is for general informational purposes only and does not constitute financial advice. It is not tailored to the specific circumstances of any individual. Before acting on the information, you should consider whether it is appropriate for you, having regard to your objectives, financial situation and needs.