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At the request of Treasurer Jim Chalmers, the Australian Securities and Investments Commission (ASIC) has updated its guidance for lenders in the handling of HELP debts.
The update to Regulatory Guide 209 Credit licensing: Responsible lending conduct (RG 209) has included some stipulations to better clarify student debts.
The newest introductions to the guide are:
- “HELP debt, such as HECS-HELP or a FEE-HELP loan, is different from other debt, because whether a consumer needs to start repaying the loan and the amount that is repaid, are both contingent on the consumer’s income. These loans may therefore be considered differently by a lender from other consumer debts.”
- “Lenders may also choose to consider the circumstances of the consumer’s outstanding HELP debt. In particular, after taking into account the remaining HELP debt the consumer owes, the expected time period to repay the debt and the anticipated term of the proposed loan, a lender may consider it appropriate not to factor in an applicant’s HELP debt when calculating a consumer’s outgoings.”
- “We recognise it may not be possible to identify with certainty the extent to which current expenditure on items in RG 209.67 are essential or if the consumer would be able to make some reductions if needed. You are likely to need additional information to determine whether the consumer has higher levels of essential spending, which cannot be reduced or eliminated, because of their particular circumstances.”
These regulatory changes were made off the back of consultations to better represent students with debt in their loan applications.
Now, credit licensees must comply with the responsible lending obligations introduced. As previously discussed by the Treasurer, the aim is to get more people into homes.
“We’re tackling this housing challenge from every possible angle. These are commonsense changes that will help more Australians into a home. I’ve agreed [to] these changes in discussions with regulators and convened the banks to discuss them,” said Chalmers.
“People with a HELP debt should be treated fairly when they want to buy a house and we’re working with the regulators to make sure they are. By unlocking more finance from the banks, we’ll see more housing projects get off the ground more quickly.”
With ASIC making moves to adhere to the government’s wishes, APRA is likely to introduce similar changes to “update and clarify its regulatory guidance to help unlock the construction of more units,” Chalmers said.
[Related: Regulators to update HELP debt guidance for mortgages]
