The Australian Financial Complaints Authority ("AFCA") has published a guide outlining the way it assesses responsible lending complaints.

The guide outlines how AFCA:

  • decides whether a financial firm has met its responsible lending obligations;
  • applies legal principles, industry codes and regulatory guidance when considering these types of complaints;
  • determines fair outcomes where the responsible lending obligations were breached; and
  • calculates a complainant's loss and assesses benefits to determine fair compensation.

AFCA's assessment process

When assessing whether a financial firm has met the responsible lending obligations, AFCA will focus on whether the credit contract was unsuitable for the complainant. It will consider whether the firm:

  • made reasonable inquiries about the consumer's financial situation, requirements and objectives;
  • undertook reasonable verification of the consumer's financial situation; and
  • provided a credit product that was not unsuitable for the consumer.

To do this, AFCA will ask the parties to provide a variety of documentation, including correspondence, forms and file notes before reviewing the inquiries that the financial firm made.

AFCA will also ask each party to provide their views about the financial firm's assessment of whether the credit product was not unsuitable for the consumer. All of which will be used by AFCA to review the financial firm's assessment and consider whether this assessment was reasonable.

Determining Loss and Fair Outcome

If AFCA determines that a financial firm has breached its responsible lending obligations and the complainant suffered a loss because of that breach, AFCA may decide that the financial firm must compensate a complainant for the losses including:

  • direct financial loss;
  • indirect financial loss; or
  • non-financial loss

It may also decide that a financial firm is required to take, or refrain from taking, particular actions.

Only the complainant is required to accept AFCA's decision, for the financial firm to be bound by the decision. This is regardless of whether the firm accepts AFCA's decision.

Next Steps

All firms that engage in credit activities should review their responsible lending obligations.

Financial firms should familiarise themselves with the guidance that AFCA publishes to ensure they have an understanding of how AFCA will deal with complaints.

The Approach to Responsible Lending Complaints is among a suite of approaches, on various topics, that can be found on AFCA's website.


AFCA is a non-for-profit entity that was established as an independent external dispute resolution scheme for the financial services sector. AFCA assists consumers and small businesses to reach agreements with financial firms about:

  • credit, finance and loans;
  • insurance;
  • banking deposits and payments;
  • investments and financial advice; and
  • superannuation