Having weathered the Global Financial Crisis relatively unscathed, the Australian credit industry finds itself under pressure to get its house in order with regard to responsible lending.
Currently the NCCP Act does not define the terms 'reasonable steps', 'verify', 'substantial hardship' and 'scalable'. This has resulted in uncertainty about compliance with responsible lending and has led some lenders to throw their hands up and pine for process certainty. Having more prescriptive responsible lending regulation may make it easier for lenders to be compliant but runs the risk of limiting innovation and automated alternative approaches.
A key point of weakness is the intersection between data governance, credit risk and responsible lending such as using transactional data, (obtained for the purpose of verifying financial information) to build risk models without explaining that use. Does that meet community expectations around how data is used?
These are questions that need to be addressed by the industry before they become problematic for the community. Responsible lending policies must adapt and evolve and be mindful of the fact that the community expects more than just ’avoidance of harm to borrowers’.
Our objective is to support the industry to reach a shared sense of what good responsible lending looks like to enable better policy and better, radically simple approaches to responsible lending processes.
From the workshops conducted as a part of our Expense Verification Framework Initiative in early 2019 , we believe that a radical simplicity approach is worth exploring as it could enable all the responsible lending goals to be met. To this end we have published two White Papers that capture the findings of our Initiative and consider the experiences and insights of a range of lenders, experts and regulators and suggest a number of ways forward.
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