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Supervision of the Responsible Lending Regimes: Theory, Evidence, Analysis and Reforms

Published online by Cambridge University Press:  01 January 2025

Gill North  and
Therese Wilson
Gill North
Affiliation:
Law School, Deakin University; Law School, University of Western Australia
Therese Wilson
Affiliation:
Law School, Griffith University
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Abstract

National responsible lending regimes have operated in Australia since 2009, with the stated aims to encourage prudent lending, curtail undesirable market practices, and impose sanctions for irresponsible lending and leasing. This article outlines a study of the supervision of the responsible lending rules by the Australian Securities and Investments Commission (ASIC) from 2014 to mid-2017. The study finds that the Commission proactively engaged with lenders, encouraged tighter lending standards, and sought or imposed severe penalties for egregious conduct. Further, the Commission strategically targeted credit products commonly acknowledged as the riskiest or most material from a borrower's perspective, such as small amount credit contracts, interest only home loans, and car loans. Despite these positive findings, however, many households are heavily indebted and large segments of the community and the nation are highly susceptible to future harm. In this environment, we question the timeliness and sufficiency of the Commission's interventions and responses, and predict further litigation that tests the boundaries of the responsible lending rules. Moving forward, we call for more systematic supervision of responsible lending risks, practices and exposures and propose modest reforms that require lenders to better inform and engage with consumers about the risks of elevated levels of debt.

Type
Article
Information
Federal Law Review , Volume 46 , Issue 2 , June 2018 , pp. 193 - 229
Copyright
Copyright © 2018 The Australian National University

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Footnotes

*

Readers should note that this article was accepted for publication in February 2018, prior to the start of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

References

1 Digital Finance Analytics and the Centre for Commercial Law and Regulatory Studies at Monash University, ‘The Stressed Finance Landscape Data Analysis’ (Report, October 2015); Ben Phillips and Matthew Taylor, ‘Buy Now and Pay Later: Household Debt in Australia’ (Income and Wealth Report Issue 38, AMP.NATSEM, December 2015) 6.

2 Reserve Bank of Australia (RBA), Chart Pack (August 2017) 9. See also North, Gill, ‘Small Amount Credit Contract Reforms in Australia: Household Survey Evidence and Analysis’ (2016) 27 Journal of Banking and Finance Law and Practice 203, 208Google Scholar.

3 See Philip Lowe, ‘Household Debt, Housing Prices and Resilience’ (Speech delivered at Economic Society of Australia (QLD) Business Lunch, Brisbane, 4 May 2017); North, Gill, ‘The Australian House Party has been Glorious—But the Hangover May Be Severe: Reforms to Mitigate Some of the Risks’ in Levy, Ron et al (eds), New Directions for Law in Australia: Essays in Contemporary Law Reform (ANU Press, 2017)Google Scholar.

4 North, ‘Small Amount Credit Contract Reforms in Australia’, above n 2, 203.

5 Ibid 203; RBA, Statistical Tables: E2 Household Finances—Selected Ratios (21 December 2017).

6 See Commonwealth, Strategies for Reducing Reliance on High-cost, Short-term, Small Amount Lending, Discussion Paper (April 2012) 3–4. See also Connolly, Chris, Measuring Financial Exclusion in Australia (Report, Centre for Social Impact, University of New South Wales, 2014) 5, 9Google Scholar; Muir, Kristy, Marjolin, Axelle and Adams, Sarah, Eight Years on the Fringe: What Has It Meant To Be Severely or Fully Financially Excluded in Australia? (Report, Centre for Social Impact, University of New South Wales, 2015) 5Google Scholar.

7 Bankruptcy Act 1966 (Cth). See Australian Financial Security Authority, Non-Business Related Causes of Personal Insolvencies 2016–17 <https://www.afsa.gov.au/statistics/causes-non-business-related>. These statistics show that excessive use of credit is now the most common non-business related cause of personal insolvencies in Australia. See also Ali, Paul et al, ‘The Incidence and Causes of Personal Bankruptcy in Australia’ (2016) 4 JASSA—Finsia Journal of Applied Finance 27Google Scholar.

8 The responsible lending provisions are a sub-set of the various laws designed to protect consumers of credit.

9 National Consumer Credit Protection Act 2009 (Cth) (‘NCCP’) pts 3.1–3.2. Section 8 of the NCCP states that a person provides credit assistance to a consumer if, by dealing directly with the consumer or the consumer's agent in the course of, as part of, or incidentally to, a business carried on in this jurisdiction by the person or another person, the person: (a) suggests that the consumer apply for a particular credit contract with a particular credit provider; or (b) suggests that the consumer apply for an increase to the credit limit of a particular credit contract with a particular credit provider; or (c) suggests that the consumer remain in a particular credit contract with a particular credit provider; or (d) assists the consumer to apply for a particular credit contract with a particular credit provider; or (e) assists the consumer to apply for an increase to the credit limit of a particular credit contract with a particular credit provider; or (f) suggests that the consumer apply for a particular consumer lease with a particular lessor; or (g) suggests that the consumer remain in a particular consumer lease with a particular lessor; or (h) assists the consumer to apply for a particular consumer lease with a particular lessor.

10 NCCP ss 115–16, 128–32.

11 Ibid.

12 The Australian Prudential Regulation Authority (APRA) is responsible for the prudential supervision of authorised deposit institutions in Australia. The actions taken by APRA around lending standards are reviewed in a companion article because the roles and responsibilities of the Australian Securities and Investments Commission (ASIC) and APRA differ markedly. See Gill North and Therese Wilson, ‘Prudential Supervision of Residential Property Lending: Has APRA Been Asleep at the Wheel?’ (Working Paper, May 2018).

13 Explanatory Memorandum, National Consumer Credit Protection Bill 2009 (Cth) [3.16].

14 Ibid [3.11].

15 Ibid [3.16].

16 See, eg, James Eyers, ‘APRA to Ramp Up Scrutiny of Bank Lending Practices’, The Australian Financial Review (online), 8 September 2017 <:http://www.afr.com/x/gydmfb>; Bank of England, ‘Financial Stability Report’ (Report No 42, Bank of England, November 2017) 13–20.

17 For the purposes of this article, the term ‘standard home loan’ includes mortgages on residential properties for the purposes of owner occupation and or investment but excludes reverse mortgages. Reverse mortgages are a specialised and complex form of loan and represent only a tiny share of outstanding residential property loans in Australia.

18 The monthly data from the Reserve Bank of Australia indicates that mortgage loans totalled more than $1,723 billion at the end of December 2017 and represented nearly 62 per cent of total credit on a seasonally adjusted basis: Reserve Bank of Australia Monthly Data December—D2 Lending and credit aggregates (Released 31 Jan 2018)

19 See North, ‘Small Amount Credit Contract Reforms in Australia’, above n 2.

20 Ibid 208; Martin North, ‘Pay Day Lending Running Hot’ (30 January 2018) Digital Finance Analytics <:http://digitalfinanceanalytics.com/blog/pay-day-lending-still-running-hot/>; Jill Treanor, ‘UK Financial Watchdog Investigates Car Loans Market’, The Guardian (online), 29 June 2017 <:https://www.theguardian.com/business/2017/jun/29/uk-fca-car-loans-market>. The North article finds that SACC loans increased an estimated 10 per cent per annum from 2005 to 2015. Over the same period, total credit rose 7 per cent per annum, with mortgages (including owner occupied and investor loans) rising 7.8 per cent; other personal credit 2.2 perc ent; and business credit 5.8 per cent. More recent RBA data indicates that the growth levels of credit for 2016 and 2017 were as follows: housing (6.3 per cent in both years), personal loans (-0.9 and -1.1 per cent); business loans (5.3 and 3.2 per cent) and total credit (5.6 and 4.8 per cent). The RBA data excludes SACCs, but household survey data collected by Digital Finance Analytics suggests growth in SACC loans was 10.7 per cent and 14.5 per cent in 2016 and 2017 respectively. In contrast, total consumer credit is rising in the United Kingdom (UK) at 10.3 per cent a year, with growth in the car finance segment most rapid at 15 per cent per annum. The Bank of England and Financial Conduct Authority are concerned about the lack of transparency, potential conflicts of interest, and possible irresponsible lending in car financing. While specific data on car loans is not collected or published in Australia, the trends and issues highlighted in the UK may apply in Australia.

21 Ian Ayres and John Braithwaite, Responsive Regulation: Transcending the Deregulation Debate (Oxford University Press, 1992) 25.

22 Comino, Vicky, ‘Towards Better Corporate Regulation in Australia’ (2011) 26 Australian Journal of Corporate Law 6, 36Google Scholar.

23 As discussed in Part V of the article, borrower vulnerabilities arise from limited income, education, and financial capacity as well as behavioural biases.

24 Commonwealth of Australia, ‘Performance of the Australian Securities and Investments Commission’ (Final Report, Senate Economics References Committee, 26 June 2014) [4.1]–[4.46].

25 See, eg, Minsky, Hyman P, ‘A Theory of Systemic Fragility’ in Altman, Edward I and Sametz, Arnold W (eds), Financial Crises: Institutions and Markets in a Fragile Environment (John Wiley and Sons, 1977)Google Scholar; Minsky, Hyman P and Vaughan, Mark D, ‘Debt and Business Cycles’ (1990) 25 Business EconomicsGoogle Scholar. See also Crowe, Christopher et al (eds), Macrofinancial Linkages: Trends, Crises, and Policies (International Monetary Fund, 2010)Google Scholar; The Joint Forum, ‘Developments in Credit Risk Management Across Sectors: Current Practices and Recommendations’ (Bank for International Settlements, June 2015).

26 Financial Stability Board, ‘FSB Principles for Sound Residential Mortgage Underwriting Practices’ (April 2012) 1.

27 See, eg, Ramsay, Iain, ‘Consumer Credit Law, Distributive Justice and the Welfare State’ (1995) 15 Oxford Journal of Legal Studies 177CrossRefGoogle Scholar; Ali, Paul, Bourova, Evgenia and Ramsay, Ian, ‘The Statutory Right to Seek a Credit Contract Variation on the Grounds of Hardship: A History and Analysis’ (2016) 44 (1) Federal Law Review 77, 81, 101CrossRefGoogle Scholar. See also Udo Reifner et al, ‘Consumer Overindebtedness and Consumer Law in the European Union’ (Final Report, Institute for Financial Services e.V. Erasmus University Rotterdam/School of Law University of Helsinki/Helsinki Collegium for Advanced Studies, September 2003).

28 See, eg, Schwartz, Alan, ‘Unconscionability and Imperfect Information: A Research Agenda’ (1991) 19 Canadian Business Law Journal 437, 444–9Google Scholar; Wilson, Therese, ‘The Responsible Lending Response’ in Wilson, Therese (ed) International Responses to Issues of Credit and Over-indebtedness in the Wake of Crisis (Ashgate, 2013) 109Google Scholar.

29 Howells, Geraint, ‘The Potential and Limits of Consumer Empowerment by Information’ (2005) 32 Journal of Law and Society 349, 358CrossRefGoogle Scholar.

30 See, eg, Weinstein, Neil D, ‘Unrealistic Optimism About Future Life Events’ (1980) 39 Journal of Personality and Society Psychology 806CrossRefGoogle Scholar; Sunstein, Cass R, Jolls, Christine and Thaler, Richard H, ‘A Behavioural Approach to Law and Economics’ (1998) 50 Stanford Law Review 1471Google Scholar; Bar-Gill, Oren, ‘Seduction by Plastic’ (2004) 98 North Western University Law Review 1373, 1396–9Google Scholar; Laibson, David, ‘Golden Eggs and Hyperbolic Discounting’ (1997) 112(2) Quarterly Journal of Economics 443CrossRefGoogle Scholar; Pottow, John A E, ‘Private Liability for Reckless Consumer Lending’ (2007) 1 University of Illinois Law Review 405, 412–13Google Scholar. See also discussion in Ramsay, Iain, Consumer Law and Policy: Text and Materials on Regulating Consumer Markets (Hart Publishing, 2007) 73, 79–80Google Scholar.

31 See, eg, Bar-Gill, above n 30, 1375; Pottow, above n 30, 431.

32 Ayres and Braithwaite, above n 21.

33 Smith, Dimity Kingsford, ‘A Harder Nut to Crack? Responsive Regulation in the Financial Services Sector’ (2011) 44 University of British Columbia Law Review 695, 71Google Scholar1.

34 RBA, Statistical Tables: E2 Household Finances—Selected Ratios (21 December 2017).

35 Digital Finance Analytics proprietary data as at end of April 2018. Financial stress and distress can be defined and measured in numerous ways. Digital Finance Analytics measures and tracks levels of household financial stress in Australia based on the cashflow of a household, (including its income, outgoings, and debt repayments).

36 Lowe, ‘Household Debt, Housing Prices and Resilience’, above n 3.

37 Ibid; North, Gill, ‘Well Governed, Sustainable and Socially Responsible Financial Corporations: Remote Or Real Expectations?’ in Plessis, Jean J du, Varottil, Umakanth and Veldman, Jeroen (eds), Globalisation of Corporate Social Responsibility and its Impact on Corporate Governance (Springer Publishing, Switzerland, 2017)Google Scholar.

38 The more significant negative consequences for households and nations arise from economic downturns that typically accompany such crises, including higher unemployment, reductions in the value of investment assets including housing and equities, reduced savings, lower consumption, and significant falls in business and consumer confidence: See, eg, Financial System Inquiry Final Report (The Australian Government the Treasury, November 2014) 33, 43–4, 47. See also Financial Service Inquiry Interim Report (The Australian Government the Treasury, July 2014), 2–57; Michael Thornley, ‘Financial Stability Risk from Housing Market Cycles’ (Bulletin Vol 79(12), Reserve Bank of New Zealand, July 2016).

39 Organisation for Economic Co-operation and Development, ‘Focus on Top Incomes and Taxation in OECD Countries: Was the Crisis a Game Changer?’ (May 2014) 3.

40 Philip Lowe, ‘Resilience and Ongoing Challenges’ (Speech delivered at the Urban Development Institute of Australia National Congress, Adelaide, 8 March 2016).

41 See, eg, Commonwealth Official Committee Hansard, Standing Committee of Economics, 24 February 2017, 1–4 (Philip Lowe).

42 Phillips and Taylor, above n 1, 12.

43 JCP Investment Partners, ‘Investing in Practice: Over Capitalised, Over Extended … LTI Overlooked?’ (May 2017); Axelle Marjolin, Kristy Muir, Joana Ramia, Julian Trofimovs, and Abigail Powell, ‘Why is Financial Stress on the Rise? Financial Resilience in 2016’ (Report Part 1, Centre for Social Impact (CSI) and the National Australia Bank (NAB), September 2017) 9, 22. A survey by the CSI and NAB found that 31.6 per cent of respondents had either no savings or less than a month of savings.

44 See Australian Securities and Investments Commission, Find a Media Release <:http://asic.gov.au/about-asic/media-centre/find-a-media-release>.

45 Thirty infringement notices were issued against Cash Converters involving total penalties of $1.35 million. See ASIC, ‘16-380MR Cash Converters to Pay Over $12M Following ASIC Probe’ (Media Release, 9 November 2016) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-380mr-cash-converters-to-pay-over-12m-following-asic-probe/>.

46 Twenty-two infringement notices were issued against BMW involving total penalties of $391 000. See ASIC, ‘16-019MR BMW Finance Pays $391,000 Penalty for Breaching Responsible Lending and Repossession Laws’ (Media Release, 2 February 2016) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-019mr-bmw-finance-pays-391-000-penalty-for-breaching-responsible-lending-and-repossession-laws/>.

47 Wayne Byres, ‘Sound Lending Standards and Adequate Capital: Preconditions for Long-term Success’ (Speech delivered at COBA and CEO & Director Forum, 13 May 2015) 1. Australia's exposure to housing markets is large (both on an historical basis and relative to other jurisdictions).

48 North, above n 2. See also North, Gill, ‘Small Amount Credit Contract Reforms: Will the Affordability Cap Achieve Its Intended Objectives Without Unintended Adverse Consequences?’ (2017) 32 Australian Journal of Corporate Law 1Google Scholar; North, Gill, ‘Small Amount Credit Contract Reforms: Have Transparency and Competition Concerns Been Forgotten?’ (2017) 25 Competition and Consumer Law Journal 101Google Scholar.

49 Ibid.

50 ASIC, ‘Lenders to Improve Standards Following Interest-only Loan Review’ (Media Release, 15-220MR, 20 August 2015) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2015-releases/15-220mr-lenders-to-improve-standards-following-interest-only-loan-review/>.

51 Ibid.

52 Ibid. See also ASIC, ‘Review of interest-only home loans’ (Report 445, 20 August 2015) <:http://asic.gov.au/regulatory-resources/find-a-document/reports/rep-445-review-of-interest-only-home-loans/>. The ASIC industry study found that there was substantial variation in the way lenders applied interest rate buffers. On pages 48–51 of Report 445, ASIC discusses the ability of consumers with interest only loans to service their loans, including the buffers allowed for interest rate rises. ASIC notes that APRA has advised lenders that they should apply a minimum interest rate buffer of at least 2 per cent and a minimum floor rate of 7 per cent. It emphasises the need for more caution when the lenders have used a benchmark for estimating the expenses of a borrower and when the surplus calculated for a borrower's financial situation is low.

53 ASIC, ‘ASIC Concerns about Loan Applications Result in Cancellation of Mortgage Brokers Licence’ (Media Release, 14-030MR, 18 February 2014) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2014-releases/14-030mr-asic-concerns-about-loan-applications-result-in-cancellation-of-mortgage-brokers-licence/>. Counted as one action.

54 ASIC, ‘ASIC Investigation Leads to Interactive Brokers Refunding $1.5 million to Australian Customers’ (Media Release, 14-336MR, 16 December 2014) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2014-releases/14-336mr-asic-investigation-leads-to-interactive-brokers-refunding-15-million-to-australian-customers/>. Counted as two actions.

55 ASIC, ‘ASIC Concerns Prompt Wide Bay to Review Lending Standards’ (Media Release, 15-013MR, 3 February 2015) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2015-releases/15-013mr-asic-concerns-prompt-wide-bay-to-review-lending-standards/>. Counted as one action.

56 ASIC, ‘ASIC Concerns Prompt Bank of Queensland to Improve Lending Practices’ (Media Release, 15-125MR, 25 May 2015) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2015-releases/15-125mr-asic-concerns-prompt-bank-of-queensland-to-improve-lending-practices/>. Counted as one action.

57 ASIC, ‘Mortgage Broking Firm Responds to ASIC's Concerns about Misleading Advertising in Chinese Language’ (Media Release, 15-292MR, 13 October 2015) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2015-releases/15-292mr-mortgage-broking-firm-responds-to-asic-s-concerns-about-misleading-advertising-in-chinese-language/>; ASIC, ‘ASIC Targets Misleading Chinese Language Home Loan Advertising’ (Media Release, 16-212MR, 30 June 2016) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-212mr-asic-targets-misleading-chinese-language-home-loan-advertising/>. Counted as six actions.

58 ASIC, ‘ASIC Commences Civil Penalty Proceedings Against Westpac for Breaching Home-loan Responsible Lending Laws’ (Media Release, 17-048MR, 1 March 2017) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2017-releases/17-048mr-asic-commences-civil-penalty-proceedings-against-westpac-for-breaching-home-loan-responsible-lending-laws/>. Counted as one action.

59 These six banks are ANZ, Commonwealth Bank, National Australia Bank, Bendigo and Adelaide Bank, ING Bank and Macquarie Bank.

60 ASIC, ‘ASIC Announces Further Measures to Promote Responsible Lending in the Home Loan Sector’ (Media Release, 17-095, 3 April 2017) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2017-releases/17-095mr-asic-announces-further-measures-to-promote-responsible-lending-in-the-home-loan-sector/>. Counted as eight actions.

61 See, eg, Ali, Bourova and Ramsay, above n 27; Oren Bar-Gill and Warren, Elizabeth, ‘Making Credit Safer’ (2008) 157 University of Pennsylvania Law Review 1Google Scholar; Brescia, Raymond H, ‘The Cost of Inequality: Social Distance, Predatory Conduct, and the Financial Crisis’ (2010) 66 NYU Annual Survey of American Law 641Google Scholar.

62 ASIC, ‘Review of micro lenders’ responsible lending conduct and disclosure obligations’ (Report 254, 22 November 2011). <:http://asic.gov.au/regulatory-resources/find-a-document/reports/rep-264-review-of-micro-lenders-responsible-lending-conduct-and-disclosure-obligations/>.

63 ASIC, ‘Payday lenders and the new small amount lending provisions’ (Report 426, 17 March 2015) [13]–[16] <:http://download.asic.gov.au/media/3038267/rep-426-published-17-march-2015.pdf>.

64 Ibid [31]–[33].

65 Ibid.

66 In February 2014, ASIC issued three infringement notices against Paid International Ltd (formerly First Stop Money Limited) for advertising ‘instant decisions’ and loan approvals ‘within minutes’. These actions alleged a breach of section 12DB(1)(e) of the Australian Securities and Investment Commission Act 2001 (Cth) for false or misleading representations in advertising and were therefore excluded from the study count. However, the media release by ASIC explains that these actions were motivated by responsible lending concerns. Paid International Ltd paid the required penalties totalling $30 600 on 14 March 2014. ASIC, ‘Small Amount Lender Pays 30600 Dollar Penalty for Misleading Online Advertisements’ (Media Release, 14-065MR, 2 April 2014) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2014-releases/14-065mr-small-amount-lender-pays-30600-dollar-penalty-for-misleading-online-advertisements/>. Infringement notices D141599, D141603 and D141605.

67 ASIC, ‘Payday Lender Penalised for Breaching New Responsible Lending Laws’ (Media Release, 14-313MR, 25 November 2014) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2014-releases/14-313mr-payday-lender-penalised-for-breaching-new-responsible-lending-laws/>. Counted as one action. Infringement notice C302730 for breach of section 130 National Consumer Credit Protections Act 2009 (Cth) failure to make inquiries and verifications. The penalty was paid on 15 October 2014.

68 ASIC, ‘ASIC Cancels Credit Licence and Bans Director for 10 Years’ (Media Release, 14-312MR, 25 November 2014) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2014-releases/14-312mr-asic-cancels-credit-licence-and-bans-director-for-10-years/>. Counted as one action.

69 [2014] FCA 926. Counted as two actions.

70 ASIC, ‘Federal Court Orders Record Penalty’ (Media Release, 15-032MR, 19 February 2015) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2015-releases/15-032mr-federal-court-orders-record-penalty/>. Counted as two actions.

71 [2014] FCA 926 [43]–[45].

72 [2014] FCA 926 [42].

73 ASIC, ‘Money3 Provides Over $100,000 in Refunds to Consumers as ASIC's Payday Lending Crackdown Continues’ (Media Release, 15-168MR, 1 July 2015) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2015-releases/15-168mr-money3-provides-over-100-000-in-refunds-to-consumers-as-asic-s-payday-lending-crackdown-continues/>. Counted as one action.

74 ASIC, ‘Payday Lender Nimble to Refund $1.5 million Following ASIC Probe’ (Media Release, 16-089MR, 23 March 2016) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-089mr-payday-lender-nimble-to-refund-15-million-following-asic-probe/>; Enforceable Undertaking 029533337 by Nimble Australia Pty Ltd under s 322(1) of the NCCP dated 18 March 2016. Counted as three actions.

75 ASIC, ‘Cash Converters to Pay Over $12M Following ASIC Probe’ (Media Release, 16-380MR, 9 November 2016) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-380mr-cash-converters-to-pay-over-12m-following-asic-probe/>; Infringement Notices R20160000662849-R20160000662955 issued to Cash Converters Personal Finance Pty Ltd under s133 of the NCCP dated 10 October 2016; Infringement Notices R20160000662861-R20160000662961 issued to Cash Converters Personal Finance Pty Ltd under s131 of the NCCP dated 10 October 2016. Counted as 30 actions.

76 Enforceable Undertaking 029744238 by Cash Converters Personal Finance Pty Ltd and Cash Converters International Ltd under s 322(1) of the NCCP dated 4 November 2016. Counted as two actions.

77 Commonwealth Treasury Department, ‘Review of The Small Amount Credit Contract Laws: Interim Report’ (Report, December 2015) 8. Some SACC participants have acknowledged that the industry has compliance and reputational issues, and are responding positively. For example, Cash Converters indicated in its 2016 annual report that it needs to achieve a better balance between responsible lending, commercial objectives, and financial inclusion. The National Credit Providers Association board has also agreed to develop an industry code of conduct and has begun consultations with ASIC: Cash Converters, 2016 Annual Report 3; NCPA, ‘Small Loan Industry Association to Set Regulations for Loan Providers’ (Media Release, 11 November 2016).

78 Commonwealth Treasury Department, ‘Review of the Small Amount Credit Contract Laws Final Report’ (Report, March 2016) 9.

79 ASIC alleged that Jeremy (WA) Pty Ltd breached s 12DB(1)(i) of the Australian Securities and Investments Commission Act 2001 (Cth) when it advertised ‘guaranteed’ car finance. These actions alleged false or misleading representations in advertising and were therefore excluded from the study count. However, once again, ASIC's media release explains that these actions were motivated by responsible lending concerns. ASIC issued two infringement notices against the company and Jeremy (WA) Pty Ltd paid the required penalties totalling $20 400: ASIC, ‘Finance Broker Pays 20400 Dollars Infringement Notice Penalty’ (Media Release, 14-022MR, 5 February 2014). <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2014-releases/14-022mr-finance-broker-pays-20400-dollars-infringement-notice-penalty/>. Infringement notices B667429 and B667435.

80 ASIC, ‘ASIC Cancels Credit Licence of Victorian Credit Provider’ (Media Release, 14-253MR, 26 September 2014) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2014-releases/14-253mr-asic-cancels-credit-licence-of-victorian-credit-provider/>. Counted as one action.

81 ASIC, ‘ASIC Bans Former Car Loan Broker and Cancels Licence’ (Media Release, 15-621MR , 18 September 2015) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2015-releases/15-261mr-asic-bans-former-car-loan-broker-and-cancels-licence/>. Counted as one action.

82 ASIC, ‘ASIC Imposes Licence Conditions on United Financial Services Pty Ltd’ (Media Release, 15-281MR, 1 October 2015) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2015-releases/15-281mr-asic-imposes-licence-conditions-on-united-financial-services-pty-ltd/>. Counted as one action.

83 ASIC, ‘ASIC Imposes Licence Conditions on Car Financier’ (Media Release, 15-299MR, 22 October 2015) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2015-releases/15-299mr-asic-imposes-licence-conditions-on-car-financier/>. Counted as one action.

84 ASIC, ‘BMW Finance Pays $391,000 Penalty for Breaching Responsible Lending and Repossession Laws’ (Media Release, 16-019MR, 2 February 2016) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-019mr-bmw-finance-pays-391-000-penalty-for-breaching-responsible-lending-and-repossession-laws/>. Counted as seven actions: Six infringement notices B1084381, B1084595, B1084625 dated 17 November 2015; and B1097324, B1103403, B1104045 dated 11 December 2015, for breaches of sections 130(1), 131(1), 133(1) of the NCCP; and one compliance review

85 ASIC, ‘Cairns-based Car Yard Lender and Broker Breached Consumer Credit Laws’ (Media Release, 16-335MR, 30 September 2016) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-335mr-cairns-based-car-yard-lender-and-broker-breached-consumer-credit-laws/>. Counted as three actions.

86 Australian Securities and Investments Commission v Channic Pty Ltd (No 5) [2017] FCA 363. See also ASIC, ‘Queensland Car Yard Lender Ordered to Pay Over $1.2 Million After Breaching Consumer Credit Laws’ (Media Release, 17-108MR, 7 April 2017) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2017-releases/17-108mr-queensland-car-yard-lender-ordered-to-pay-over-12-million-after-breaching-consumer-credit-laws/>.

87 ASIC, ‘ASIC Action Sees BMW Finance Pay $77 Million in Australia's Largest Consumer Credit Remediation Program’, (Media Release, 16-417MR, 6 December 2016) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-417mr-asic-action-sees-bmw-finance-pay-77-million-in-australias-largest-consumer-credit-remediation-program/>. Counted as four actions. ASIC alleged that BMW breached ss 128(d), 1430(1)(a), 130(1)(c), 131(1) and 133 (1) of the NCCP. Enforceable undertaking 029804328 accepted by ASIC on 2 December 2016.

88 ASIC, ‘Motor Finance Wizard to Pay Over $11 Million in Remediation Over Responsible Lending Concerns’ (Media Release, 17-150MR, 24 May 2017) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2017-releases/17-150mr-motor-finance-wizard-to-pay-over-11-million-in-remediation-over-responsible-lending-concerns/>. Counted as four actions. ASIC alleged that Motor Finance Wizard breached ss 130(1)(b), 130(1)(c), 133(1), 153(1)(b), 153(1)(c), 156(1) of the NCCP. Enforceable undertaking 029490310 accepted by ASIC on 23 May 2017.

89 The Uniform Consumer Credit Code (‘UCCC’) was enacted initially as the Consumer Credit (Queensland) Act 1994 (Qld). Equivalent legislation was then passed by other States and Territories. The UCCC scheme operated from 1996 until the commencement of the NCCP.

90 For background, see Taylor, Bruce, ‘New National Responsible Lending Obligations - Pt 1’ (2011) 39 Australian Business Law Review 464Google Scholar; Taylor, Bruce, ‘New National Responsible Lending Obligations—Pt 2’ (2012) 40 Australian Business Law Review 43Google Scholar.

91 The second phase of the reforms included measures to protect consumers in new credit categories including reverse mortgages, small amount credit contracts, and consumer leases. Detailed discussion of the reverse mortgage and consumer lease provisions is beyond the scope of this article.

92 NCCP pt 3.1

93 Ibid pt 3.2.

94 Ibid s 8.

95 For a more detailed outline of Australian home loan participants and their roles, market, see ASIC, ‘Review of Mortgage Broker Remuneration’ (Report No 516, March 2017) 49–74.

96 NCCP ss 115–16, 128–31.

97 See National Consumer Credit Protection Regulations 2010 (Cth) s 26.

98 NCCP s 130.

99 Ibid ss 117–18.

100 Ibid s 130.

101 Ibid s 130(1)(b).

102 Ibid s 130(1)(c).

103 Ibid s 130(1)(c).

104 Ibid s 131(1).

105 Ibid ss 120, 132. ASIC suggests consumers should be given sufficient information to enable them to check the factual basis of an assessment and query any inaccuracies. It notes that credit licensees are not expected to disclose commercially sensitive lending criteria on which a credit decision is based: ASIC, ‘Credit Licensing: Responsible Lending Conduct’ (Regulatory Guide 209, November 2014) 50 [143]–[146] <:http://www.asic.gov.au/media/2243019/rg209-published-5-november-2014.pdf>.

106 NCCP s 131(2)(a).

107 Ibid s 131(2)(b).

108 See Consumer Credit and Corporations Legislation Amendment (Enhancements) Act 2012 (Cth). The amendments were made to the NCCP.

109 NCCP s 167.

110 Ibid s 177.

111 Ibid s 45.

112 Ibid div 6. See ASIC, ‘Licensing: Administrative Action against Persons Engaging in Credit’ Activities (Regulatory Guide 218, November 2010) 6–19.

113 NCCP ss 120(4) and s 132(5). The penalty is 50 penalty units and equates to a fine of $10 500 under the Crimes Act 1914 (Cth) (as amended by the Crimes Amendment (Penalty Unit) Act 2017 (Cth)).

114 NCCP s 133(6). The penalty is 100 penalty units and may result in a fine of $21 000, or 2 years imprisonment, or both, under the Crimes Act 1914 (Cth) (as amended by the Crimes Amendment (Penalty Unit) Act 2017 (Cth)).

115 NCCP ss 178–9. When a credit provider does not have resources to both pay a penalty and compensation, the NCCP requires the court to give preference to the order for compensation: NCCP s 181.

116 National Consumer Credit Protection Regulations 2010 (Cth) reg 39. See also ASIC, ‘Licensing: Administrative Action against Persons Engaging in Credit Activities’ (Regulatory Guide 218, November 2010), 16, 18. Regulatory Guide 218 indicates that the key factors ASIC considers in deciding to take administrative action include the nature and seriousness of the suspected misconduct, the state of the credit licensee's internal controls; conduct after the misconduct occurs, the previous regulatory record, and mitigating factors.

117 The infringement notice penalties are typically significantly less than the possible civil or criminal penalty.

118 ASIC, Credit and ASIC Act Infringement Notices Register (27 March 2018) <:http://asic.gov.au/online-services/search-asics-registers/additional-searches/credit-and-asic-act-infringements-notices-register/>.

119 This criticism was made in the context of ASIC infringement notices under pt 9.4AA of the Corporations Act 2001 (Cth). See McConvill, James, ‘Australian Securities and Investments Commission's Proposed Power to Issue Infringement Notices: Another Slap in the Face to s 1324 of The Corporations Act or an Undermining of Corporate Civil Liberties?’ (2003) 31 Australian Business Law Review 36Google Scholar; Middleton, Tom, ‘ASIC's Investigation and Enforcement Powers—Current Issues and Suggested Reforms’ (2004) 22 Company and Securities Law Journal 503Google Scholar; Hyland, Margaret, ‘Infringement Notices under the Corporations Act 2001 (Cth): Has the Commonwealth Parliament Gone Too Far?’ (2008) 10 University of Notre Dame Australia Law Review 115Google Scholar; Rees, Anne, ‘Infringement Notices and Federal Regulation: Wolves in Sheep's Clothing?’ (2014) 42 Australian Business Law Review 276Google Scholar.

120 NCCP s 322(1).

121 NCCP s 322(3).

122 ASIC, ‘Enforceable Undertakings’ (Regulatory Guide 100, February 2015) 6. See also ASIC, ‘Licensing: Administrative Action against Persons Engaging in Credit Activities’ (Regulatory Guide 218, November 2010).

123 ASIC, Enforceable Undertaking Register (26 April 2018) <:http://asic.gov.au/online-services/search-asics-registers/additional-searches/enforceable-undertakings-register/>.

124 ASIC, ‘Review of Mortgage Broker Remuneration’ (Report 516, 17 March 2017) 37–8.

125 NCC ss 5(1)(a), 5(1)(b)(i) in sch 1 of the NCCP.

126 The NCC increased the maximum threshold for application of the hardship provisions from $312 400 to $500 000 and includes a power for this threshold to be raised. For an outline and analysis of these provisions, see Ali, Bourova and Ramsay, above n 27.

127 NCC ss 76–7 in sch 1 of the NCCP. Another area of law that is broadly connected to responsible lending concerns the reporting of credit information. Some of the leading credit providers in Australia continue to report only negative credit information, such as loan defaults, to credit bureaus. The Federal Government has therefore indicated that it intends to mandate comprehensive credit reporting by July 2018. The required reporting will include the provision of positive information such as a borrower's loan repayment history and credit limits. The Commonwealth Treasurer, the Hon Scott Morrison, expects these reforms to increase credit market competition and consumer access to finance. APRA hopes the reforms will improve credit risk assessments by credit providers: see Scott Morrison, ‘Mandating Comprehensive Credit Reporting’ (Media Release, 2 November 2017) <:http://sjm.ministers.treasury.gov.au/media-release/110-2017/>; James Eyers, ‘APRA to Ramp Up Scrutiny of Bank Lending Practices’, Australian Financial Review (online), 8 September 2017, <:http://www.afr.com/x/gydmfb>.

128 NCCP s 133AA.

129 Ibid s 133AB.

130 APRA, Quarterly ADI Property Exposures September 2017 (13 March 2018) <:http://www.apra.gov.au/adi/Publications/Pages/Quarterly-ADI-Property-Exposures-statistics.aspx>.

131 NCCP s 121(2).

132 ASIC, ‘Review of Mortgage Broker Remuneration’ (Report 516, 16 March 2017). See also Explanatory Memorandum, National Consumer Credit Protection Bill 2009 (Cth) [3.11]; North, Gill, ‘Regulation Governing the Provision of Credit Assistance and Financial Advice in Australia: A Consumer's Perspective’ (2015) 43 Federal Law Review 369, 382–3CrossRefGoogle Scholar.

133 Combined Industry Forum, ‘Improving Customer Outcomes: The Combined Industry Forum Responses to ASIC Report 516: Review of Mortgage Broker Remuneration’ (11 December 2017) <:https://www.ausbanking.org.au/images/uploads/CIF_Report_Submitted_281117.pdf>. The already broad scope of this article does not allow us to provide a detailed response to this report. But see the North article in the footnote above that discusses and critiques the differing obligations that apply to financial advisers and credit assistance providers in Australia. Our views correspond closely to those expressed in the North 2015 article.

134 NCC ss 5(1)(b)(ii)–(iii). ‘Residential property’ is defined in NCC s 204.

135 The purchase of shares may fall within the term ‘personal, domestic or household purposes’.

136 For a history of SACC lending in Australia, see Anderson, Sally, ‘Mapping the Terrain: The Last Decade of Payday Lending in Australia’ (2001) 39 Australian Business Law Review 5Google Scholar; Anderson, Sally, ‘The Phenomenon of Payday Lending’ (2013) 21 Australian Journal of Competition and Consumer Law 20Google Scholar.

137 NCCP s 5.

138 Ibid ss 131(3A), 133(3A).

139 Ibid s 133CC.

140 See ibid s 117(1A).

141 Ibid s 133CB.

142 The Treasury, Review of the Small Amount Credit Contract Laws (March 2016) <:https://static.treasury.gov.au/uploads/sites/1/2017/06/C2016-016_SACC-Final-Report.pdf>. The 10 small amount credit contract (SACC) recommendations address the areas of affordability, suitability, early loan repayments, the timing of repayments, unsolicited offers, direct debit fees, a national SACC database, referral revenue, default fees, and a continued ban on credit contracts of less than 16 days. The six recommendations that apply to both SACCs and consumer leases deal with banks statements, documenting suitability assessments, warning statements, disclosure, penalties, and avoidance.

143 Kelly O’Dwyer, ‘Government Response to the Final Report of the Review of the Small Amount Credit Contract Laws’ (Media Release, 28 November 2016) <:http://kmo.ministers.treasury.gov.au/media-release/105-2016/>. For discussion on the existing rules governing small amount credit contracts and the proposed reforms, see North, ‘Small Amount Credit Contract Reforms in Australia’, above n 2. See also North, ‘Small Amount Credit Contract Reforms: Will the Affordability Cap Achieve Its Intended Objectives Without Unintended Adverse Consequences?’, above n 48; North, ‘Small Amount Credit Contract Reforms: Have Transparency and Competition Concerns Been Forgotten?’, above n 48.Currently, the primary form of regulatory protection in Australia for consumers of small amount credit contracts is price caps.

144 The Treasury, Small Amount Credit Contract and Consumer Lease Reforms (23 October 2017) <:https://treasury.gov.au/consultation/c2017-t229374/>.

145 Thaler, Richard H and Sunstein, Cass R, Nudge: Improving Decisions about Health, Wealth and Happiness (Yale University Press, 2008)Google Scholar.

146 ASIC, ‘Credit Licensing: Responsible Lending Conduct’ (Regulatory Guide 209, November 2014) <:http://download.asic.gov.au/media/2243019/rg209-published-5-november-2014.pdf>.

147 Ibid 12–14.

148 Ibid 15–17.

149 Ibid 20–3.

150 Ibid 17–19.

151 Ibid 18.

152 Ibid 44.

153 Ibid 47–8.

154 Ibid 21–2.

155 Ibid 22.

156 Ibid 37.

157 As explained, the term ‘substantial hardship’ is not defined in the NCCP, but is presumed to occur if the consumer can only make the repayment by selling his or her principal place of residence: NCCP s 131(3).

158 ASIC, ‘Credit Licensing: Responsible Lending Conduct’ (Regulatory Guide 209, November 2014) 36 <:http://download.asic.gov.au/media/2243019/rg209-published-5-november-2014.pdf>.

159 ASIC, ‘Review of Interest-Only Home Loans’ (Report 445, August 2015) <:http://download.asic.gov.au/media/3329474/rep445-published-20-august-2015.pdf>.

160 Ibid 9.

161 ASIC, ‘Review of Interest-Only Home Loans: Mortgage Brokers’ Inquiries into Consumer Requirements and Objectives’ (Report 493, September 2016) 10 <:http://download.asic.gov.au/media/4122413/rep-493-published-14-september-2016-accessible.pdf>.

162 Morgan, Bronwen and Yeung, Karen, An Introduction to Law and Regulation: Text and Materials (Cambridge University Press, 2007) 101CrossRefGoogle Scholar.

163 Nienaber, A-M, Hofeditz, M and Searle, R H, ‘Do we Bank on Regulation or Reputation? A Meta-Analysis and Meta-Regression of Organizational Trust in the Financial Services Sector’ (2014) 32 International Journal of Bank Marketing 367, 378CrossRefGoogle Scholar. See also Teubner, Gunther, ‘Substantive and Reflexive Elements in Modern Law’ (1983) 17 Law & Society Review 239CrossRefGoogle Scholar; Collins, Hugh, ‘Regulating Contract Law’ in Parker, Christine et al (eds), Regulating Law (Oxford University Press, 2004) 13, 24CrossRefGoogle Scholar.

164 For example, the remediation process in which six banks and two non-bank lenders have engaged: ASIC, ‘ASIC Announces Further Measures To Promote Responsible Lending In The Home Sector’, (Media Release, 17-095MR, 3 April 2017) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2017-releases/17-095mr-asic-announces-further-measures-to-promote-responsible-lending-in-the-home-loan-sector/>.

165 Commonwealth of Australia, above n 24. See also Comino, above n 22.

166 See, eg, ASIC, ‘ASIC Announces Further Measures to Promote Responsible Lending in the Home Loan Sector’ (Media Release, 17-095MR, 3 April 2017) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2017-releases/17-095mr-asic-announces-further-measures-to-promote-responsible-lending-in-the-home-loan-sector/>; ASIC, ‘Motor Finance Wizard to Pay Over $11 Million in Remediation Over Responsible Lending Concerns’ (Media Release, 17-150MR, 24 May 2017) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2017-releases/17-150mr-motor-finance-wizard-to-pay-over-11-million-in-remediation-over-responsible-lending-concerns/>.

167 Connolly, above n 6; Muir, Marjolin and Adams, above n 6.

168 See, eg, Ali, Paul, McRae, Cosima Hay and Ramsay, Ian, ‘Payday Lending Regulation and Borrower Vulnerability in the UK and Australia’ (2015) 3 Journal of Business Law 223, 230Google Scholar; Carrell, Scott and Zinman, Jonathan, ‘In Harm's Way? Payday Loan Access and Military Personnel Performance’ (2014) 27 Review of Financial Studies 2805, 2806, 2829CrossRefGoogle Scholar. See also Ali, Paul, McCrae, Cosima Hay and Ramsay, Ian, ‘The Politics of Payday Lending Regulation in Australia’ (2014) 39 Monash University Law Review 411, 413, 426Google Scholar; Serpell, Andrew J, ‘Protecting the Desperate: The Regulation of Payday Lending’ (2015) 43 Federal Law Review 147, 172CrossRefGoogle Scholar.

169 Muir, Marjolin and Adams, above n 6.

170 See North, ‘Small Amount Credit Contract Reforms: Have Transparency and Competition Concerns Been Forgotten?’, above n 48.

171 APRA, ADI Quarterly Property Exposures June 2017 (29 August 2017) <:http://www.apra.gov.au/adi/Publications/Documents/QPEX_June_2017.pdf>. In December 2014, interest only home loans issued by ADIs totalled $481 437 million. By June 2017, the equivalent figure was $580 989 million.

172 Ibid.

173 Elizabeth Knight, ‘Not in Their Interest: The Home Loan Borrowers that Have Been Left Out to Dry’, Sydney Morning Herald (online) 24 June 2017 <:http://www.smh.com.au/business/banking-and-finance/not-in-their-interest-the-home-loan-borrowers-that-have-been-left-out-to-dry-20170623-gwx2dn.html>.

174 APRA, above n 171. In June 2017, investment related mortgages issued by ADIs totalled $535,684 million. The proportion of investor housing loans in the United Kingdom is around 17 per cent and the authorities there are concerned about the risks associated with these loans: Bank of England, Financial Stability Report (Issue No 39, June 2016) vi, 13.

175 Thornley, above n 38; Robert Kelly, ‘The Good, the Bad, the Impaired: A Credit Risk Model of the Irish Mortgage Market’ (Central Bank of Ireland Technical Paper 13/RT/11, 2011).

176 The publicly available statistics from APRA on interest only home loans in Australia are not split into owner occupier and investment related. Similarly, the statistics on investment related home loans from APRA and the RBA are not split by loan structure.

177 APRA, above n 171. In June 2017, owner occupier mortgages issued by ADIs totalled $1 006 24 million.

178 See, eg, Rapp, Geoffrey Christopher, ‘The Wreckage of Recklessness’ (2008) 86 Washington University Law Review 111Google Scholar; Pottow, above n 30, 405; Wilson, Therese, ‘The Responsible Lending Response’ in Wilson, Therese (ed), International Responses to Issues of Credit and Over-indebtedness in the Wake of Crisis (Ashgate, 2013) 109Google Scholar; Goodwin-Groen, RP and Kelly-Louw, M, The National Credit Act and its Regulations in the Context of Access to Finance in South Africa (Finmark Trust, 2006)Google Scholar.

179 See, eg, Ramsay, ‘Consumer Credit Law, Distributive Justice and the Welfare State’, above n 27; Udo Reifner et al, ‘Consumer Overindebtedness and Consumer Law in the European Union’ (Final Report presented to the Commission of the European Communities, Health and Consumer Protection Directorate-General, September 2003); Ali, Bourova and Ramsay, above n 27.

180 See, eg, Bar-Gill, ‘Seduction by Plastic’, above n 30, 1375; Pottow, above n 30, 431.

181 See North, ‘Regulation Governing the Provision of Credit Assistance & Financial Advice in Australia: A Consumer's Perspective’, above n 132, 373–4.

182 See Treanor, above n 20.

183 North, ‘Small Amount Credit Contract Reforms in Australia’, above n 2, 218.

184 See, eg, Weinstein, Neil D, ‘Unrealistic Optimism About Future Life Events’ (1980) 39 Journal of Personality and Society Psychology 806CrossRefGoogle Scholar; Sunstein, Cass R, Jolls, Christine and Thaler, Richard H, ‘A Behavioural Approach to Law and Economics’ (1998) 50 Stanford Law Review 1471Google Scholar; Bar-Gill, above n 30; Laibson, David, ‘Golden Eggs and Hyperbolic Discounting’ (1997) 112 Quarterly Journal of Economics 443CrossRefGoogle Scholar; Pottow, above n 30. See also Ramsay, above n 30, 73.

185 Notably, the proportion of home loan borrowers in Australia with an education limited to high school at the end of October 2017 was 79.4 per cent: Digital Finance Analytics proprietary data.

186 NCCP ss 177–8. When a credit provider does not have resources to both pay a penalty and compensation, the NCCP requires the court to give preference to the order for compensation: NCCP s 181.

187 UBS, ‘Australian Banking Sector Update UBS Evidence Lab—$500 billion in “Liar Loans”?’ (11 September 2017) 8. 15 per cent of respondents stated that they over-represented their household income, 16 per cent over-declared other assets, 15 per cent under-represented other loans or commitments, and 30 per cent under-represented their living costs.

188 Ibid. See also Michael Janda, ‘Mortgage Fraud: $500b of ‘Liar Loans” in Australia, Warns Investment Bank UBS’, ABC News (online), 14 September 2017 <:http://www.abc.net.au/news/2017-09-11/500b-dollars-of-liar-loans-in-australia-ubs/8892030>.

189 ASIC, ‘Australian Financial Attitudes and Behavioural Tracker’ (Report 541, March 2017) 44.

190 See Kathleen C Engel, ‘Can Consumer Law Solve the Problem of Complexity in U.S. Consumer Credit Products?’ (Research Paper No 14–34, Suffolk University Law School, 21 November 2014) 2, <:http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2529148>. See also North, ‘Small Amount Credit Contract Reforms in Australia’, above n 2, 218–19. The North empirical study found that households from the more affluent and well-educated population segments were generally more aware of the disclosure of the annual percentage rates (APRs) of loans, understood their role and nature, and found they were useful when comparing loan offerings. While less affluent households and those in either financial distress or under financial stress were less likely to comprehend APRs and use them when seeking credit, positive responses were received across all segments, suggesting disclosure is effective, albeit to a varying extent depending on the borrower's characteristics.

191 This approach was used by the Competition and Markets Authority and the Financial Conduct Authority in the United Kingdom when enacting rules relating to payday loans price comparison websites: see Financial Conduct Authority, Consumer Credit: Proposals in Response to the CMA's Recommendations on High-Cost Short-Term Credit (October 2015) 11–12. See also Willis, Lauren E, ‘The Consumer Financial Protection Bureau and the Quest for Consumer Comprehension’ (2017) 3(1) The Russell Sage Foundation Journal of the Social Sciences 74Google Scholar.

192 ASIC provides a series of online calculators on their MoneySmart website that consumers can use to budget and assess their financial capacity to repay a mortgage and other debt. See ASIC, Calculators & Resources (21 September 2017) <:https://www.moneysmart.gov.au/tools-and-resources>. While these facilities are commendable and could be adapted for the proposed lender websites, the share of credit consumers using these sites is low and the ASIC calculators do not warn consumers about the need to include a buffer for adverse events or provide examples of the sensitivities of a household to a series of unexpected contingencies: ASIC, ‘Australian Financial Attitudes and Behavioural Tracker’, above n 189, 44.

193 Howells, above n 29, 357. See also North, ‘Small Amount Credit Contract Reforms in Australia’, above n 2, 209–10. A survey of households using SACC loans in Australia found that 58.7 per cent indicated it was the only credit option available, 28.0 per cent thought this source of funds was convenient, and 13.3 per cent said they sought the loans out of desperation.

194 Lowe, ‘Household Debt, Housing Prices and Resilience’, above n 3. Lowe confirms that the upswing in residential construction activity has substantively supported the Australian economy over recent years.

195 ASIC, ‘Westpac Pays $1 Million Following ASIC's Concerns About Credit Card Limit Increase Practices’ (Media Release, 16-009MR, 20 January 2016) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-009mr-westpac-pays-1-million-following-asics-concerns-about-credit-card-limit-increase-practices/>; ASIC, ‘ASIC Commences Civil Penalty Proceedings Against Westpac for Breaching Home-loan Responsible Lending Laws’ (Media Release, 17-048MR, 1 March 2017) <:http://asic.gov.au/about-asic/media-centre/find-a-media-release/2017-releases/17-048mr-asic-commences-civil-penalty-proceedings-against-westpac-for-breaching-home-loan-responsible-lending-laws/>. One of ASIC's stated concerns in the action against Westpac was the bank's lack of regard for the impact on borrowers of higher payments after the interest only period.

196 Julia Corderoy, ‘APRA, Basel Committee: Another GFC is Coming’ Australian Broker (online) 6 April 2016 <:http://www.brokernews.com.au/news/breaking-news/apra-basel-committee-another-gfc-is-coming-214105.aspx>. Cohen, the Secretary-General of the Basel Committee that sets the international prudential standards for banks, describes the likelihood of future financial crises as statistically certain. Others also indicate that it is a matter of when, and not if, future financial crises will occur: see, eg, World Economic Forum, Insight Report: The Global Risks Report 2017 (2017) 4 <:http://reports.weforum.org/global-risks-2017/preface/>, where Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, suggests ‘continued slow growth combined with high debt and demographic change creates an environment that favours financial crises and growing inequality’.

197 See North, ‘The Australian House Party has been Glorious—But the Hangover May Be Severe’, above n 3, 83–92.

198 As Jane Diplock suggested in the wake of the global financial crisis, when ‘everybody is making money, and there's exuberance in the markets, it's extremely difficult to be the Jeremiah saying: ‘Look, that's a cliff you’re about to run over’. Nobody wants to hear that message, least of all [those] … whose funds are perhaps being swollen by the very people making all this money.’ ASIC, ASIC Summer School 2010, Securities and Investment Regulation: Beyond the Crisis (1–3 March 2010, Melbourne, Australia) 76.

199 As indicated in the introduction of this article, the roles and legal mandates of ASIC and APRA vary markedly, so the actions taken by APRA around lending standards will be reviewed in a companion article.