Responsible Lending Assessment for Brokers 2026

Responsible lending requires you to investigate your client’s needs and finances, verify their financial situation and assess whether the proposed loan is unsuitable. A lender’s approval doesn’t discharge your broker assessment obligations. The file must explain how the evidence supports your conclusion before you recommend the loan or help the client apply.

Define the Assessment Required

Your preliminary assessment decides whether a particular credit contract would be unsuitable for your client during the period it covers. The lender makes its own assessment and credit decision. Neither decision substitutes for the other.

The Australian Securities and Investments Commission (ASIC) responsible lending overview explains the sequence of inquiries, verification and assessment. The legal duties sit with the credit licensee. If you work as a credit representative, carry out the assessment through that licensee’s procedures.

This guide concerns regulated consumer home loans in Australia, including residential investment lending. Responsible lending also applies when you suggest that a client remain in a particular credit contract. A business-purpose loan needs its own scope analysis.

Consider this fictional application. Maya wants to buy her home using a loan with principal-and-interest repayments and an offset account. She reports monthly take-home income of $7,000, household expenses of $2,000 and an existing car repayment of $400.

Maya’s income includes overtime. The broker asks whether the overtime is regular, which expenses will continue after purchase and whether she expects her working hours to change. Those answers determine what evidence to collect and which assumptions the assessment can use.

Make and Verify Inquiries

Ask questions that connect the proposed loan to your client’s requirements and financial circumstances, then test the financial answers against supporting records. A completed fact find is the starting record of what the client tells you.

For the loan itself, record the purpose, amount, repayment term and features the client needs. Explain competing priorities, such as reducing repayments while keeping the term short. Ask about foreseeable changes, including reduced hours, parental leave or retirement during the loan.

For finances, identify each income source, regular expenses, debts, credit limits and assets. Include annual bills and commitments outside the main transaction account. Ask which costs will disappear after purchase and which new costs will begin.

For Maya, the broker compares payslips with salary credits and obtains income history that separates base pay from overtime. A single strong pay period cannot establish that the same overtime will continue. The broker also checks statements for accounts that pay household bills and the existing car loan.

The review identifies two contradictions. Maya’s $7,000 figure comes from an unusually busy month, while her recurring base take-home pay is $5,500. Her statements show $2,800 of recurring household spending, excluding the separately recorded car repayment.

Ask Maya to explain the extra $800. Check whether transactions are transfers between her accounts, reimbursed costs, one-off purchases or ongoing spending. Record her explanation and the documents that support each adjustment, without counting transfers twice.

In this fictional case, Maya confirms that the full $2,800 is recurring and must continue. Her employer confirms that overtime shifts are available occasionally but aren’t guaranteed. The broker uses base pay in the example below and keeps the overtime history on file.

The extent of reasonable verification depends on the circumstances. Variable pay, unexplained transactions or a near-limit application call for closer enquiry than figures that consistently match reliable records. A benchmark can prompt questions about expenses, but it doesn’t explain a discrepancy in this client’s spending.

When checking lender-specific income treatment, Bulma’s Policy Advisor quotes the policy wording behind its answers. Keep relevant quotations with your file notes. They support the lender-policy research, while your own inquiries establish the client’s financial position.

Assess and Record the Result

Assess whether your client can meet the proposed obligations without substantial hardship and whether the loan meets their requirements and objectives. A serviceability calculator estimates repayment capacity using its inputs and rules. Its pass result doesn’t establish that those inputs are reliable or that the client can afford the loan in practice.

For Maya, assume a proposed monthly loan repayment of $2,700. This is an illustrative repayment assumption, not a lender quote. The broker treats $2,800 as her continuing household spending after purchase and assumes no other expenses for this simplified example.

Monthly item	Initial fact find	Verified example
Take-home income	$7,000	$5,500 base pay
Continuing household spending	$2,000	$2,800
Car repayment	$400	$400
Proposed home loan repayment	$2,700	$2,700
Balance after these outgoings	$1,900	Negative $400

The initial balance is $7,000 minus $5,100. After verification, the outgoings are $5,900 against $5,500 income. The corrected figures leave a $400 monthly shortfall even before any costs omitted from the simplified example.

Maya cannot cover these outgoings from the verified base pay. The broker records that the proposed contract is unsuitable on these assumptions and doesn’t recommend it or assist with its application. Unreliable overtime cannot fill the shortfall merely because it produced a calculator pass.

A different loan amount or a later purchase requires a fresh assessment of that proposal. If Maya proposes reducing expenditure, ask what she will stop paying and whether the reduction is realistic. Record her willingness, the evidence and the effect on her stated needs before relying on the change.

Substantial hardship involves more than a negative balance. A positive balance can still leave a client unable to cover necessary costs or meet foreseeable obligations. Examine how the repayments would affect the client’s actual living arrangements and financial commitments.

Affordability is also separate from product fit. A client who needs access to savings through an offset might find a loan without that feature unsuitable for their objectives. Choosing between options that meet the assessment requirements involves the separate best interests duty.

Supply and Retain the Record

Keep the assessment and the material behind it in a form the licensee can retrieve and give to your client. The statutory right to a copy and the licence condition on supporting material serve different purposes.

Under section 120, a client can request a free written preliminary assessment within seven years of the credit assistance quote date. ASIC’s disclosure guidance gives the broker deadlines.

A request within two years of the quote requires delivery within seven business days of receipt. A later request within the seven-year window requires delivery within 21 business days.

The copy obligation doesn’t arise if you provide no credit assistance. Once you provide that assistance, a later decision not to proceed with the loan doesn’t remove the copy obligation. Keep the request, the copy sent and the delivery record together.

Regulatory Guide 209 (RG 209), paragraph 255, describes a licence condition requiring retention of the material supporting the assessment so a written copy can be supplied. Keep it available throughout the applicable request period. Apply any longer retention requirement that governs the licensee’s file, and preserve material needed for an active dispute.

For Maya, retain the original fact find alongside the corrected version. Keep payslips, statements, the employer’s response, expense explanations and the dated assessment conclusion. A later reviewer must be able to trace the change from the original $1,900 balance to the $400 shortfall.

ASIC describes preparing and supplying a written copy when the assessment is made as good practice. That differs from the obligation to supply a copy on request. The preliminary credit assessment guide covers preparing the document itself.

For the broader engagement review, use the mortgage broker compliance checklist. Use the assessment file to explain the conclusion for the particular loan.

Current Law, ASIC Guidance and AFCA Evidence

The National Consumer Credit Protection Act 2009 (NCCP Act) sets the legal obligations, while ASIC guidance explains the regulator’s interpretation. ASIC publishes RG 209, its responsible lending guidelines.

As at 2 October 2026, the current NCCP Act compilation takes effect from 1 July 2026. For ordinary home-loan credit assistance, sections 115 to 117 cover assessment timing, inquiries and verification. Section 115 generally requires those steps within 90 days before the assistance day.

Sections 118 and 119 address unsuitability, section 120 covers the requested copy and sections 123 and 124 prohibit assistance with unsuitable contracts. The lender’s separate assessment duties are in Part 3-2. A lender document checklist doesn’t define everything your broker assessment needs.

The current RG 209 PDF records a March 2025 amendment to its December 2019 guide.

Read Section B for inquiries and verification, Section C for assessment and Section D for written copies and records. Its guidance supports applying the law to individual circumstances.

The Australian Financial Complaints Authority (AFCA) explains how it considers complaints in its Responsible Lending Approach, updated in May 2025. Its consultation summary says the update clarifies expense discrepancies, while additional guidance on broker conduct remains outside that document’s expanded coverage.

AFCA considers the relevant law, regulatory guidance, industry codes, good industry practice and fairness when deciding a complaint. For a broker response, supply a chronology of the advice and the records behind each disputed assumption. Explain what you knew, what you checked and why the proposed loan met the client’s circumstances at that time.

Maya’s original fact find alone would conceal the contradiction. Her payslips, account records and follow-up notes show why the broker rejected the initial figures.

A responsible lending solution must preserve that reasoning as well as store documents. Before providing assistance, confirm that the assessment uses resolved facts and explains the conclusion for the actual proposed contract.