A Clear Guide to the NCCP Act & Responsible Lending RG209

Key Takeaways

In this post we;

• Explore what is the National Consumer Credit Protection Act (NCCP)
• Discover the history and evolution of the NCCP Act
• Unlock what are the important Key Provisions under the NCCP Act
• Understand responsible lending under the NCCP Act
• Uncover what is ASIC Regulatory Guide (RG209) and
• Provide practical training and education solutions.

Related Learning

Introduction to Consumer Credit | Credit CPD for Responsible Managers | Credit CPD for Representatives | The NCCP Act and Responsible Lending | AI in Consumer Credit | General Compliance Training | Supporting vulnerable customers in consumer credit

A Clear Guide to the NCCP Act and Its Impact on Responsible Lending Practices

Australia’s consumer credit industry is regulated by the National Consumer Credit Protection Act 2009 (NCCP Act). Being compliant with the NCCP Act is about more than minimising potential conduct risks for credit providers.

In this article, we’ll provide a brief history of the NCCP Act, discuss its core components – with a particular focus on responsible lending – and highlight how training plays a vital role in ensuring compliance with the Act.

What is The National Consumer Credit Protection Act (NCCP)?

The NCCP Act governs the provision of consumer credit in Australia. The responsible lending obligations that must be followed by credit providers are contained in Chapter 3. Schedule 1 of the Act comprises the National Credit Code, which focuses specifically on the terms and conditions of credit contracts and consumer leases.

The NCCP Act requires all organisations that provide credit to consumers to be licensed. The licensing regime and enforcement of the Act is carried out by the Australian Securities and Investments Commission (ASIC).

Importantly, not all loans and lending services are covered by the NCCP Act. When credit is provided for predominantly business purposes, the NCCP Act does not apply.

For more on this, see our recent Insights: Australian’s Private Credit Market: What’s Driving its Rapid Growth?

History and Evolution of the NCCP Act

Australia introduced the NCCP Act in 2009 to address poor consumer credit practices. Reforms were already underway before the Global Financial Crisis (GFC) in 2008, however this event significantly influenced the final legislative output.

The GFC highlighted the negative impact of aggressive bank-lending practices on international market stability. In the wake of this, jurisdictions across the globe introduced responsible lending laws to prevent a future financial collapse. The NCCP Act legislated Australia’s responsible lending framework, which requires lenders to meet specific obligations when providing consumer credit.

Prior to the NCCP Act, Australia’s consumer credit laws were state-based, which made it challenging for lenders to understand their obligations. The NCCP Act consolidated these into a new National Credit Code.

Since its implementation, a number of amendments have been made to the Act to strengthen consumer protections, including:

• Enabling the use of electronic documentation and signatures
• Enhancements to the consumer protection framework in relation to small amount credit contracts and consumer leases
• More flexible procedures for debtors experiencing financial hardship
• The introduction of a best interests duty for mortgage brokers.

Most recently, the NCCP Act was expanded to include Buy Now Pay Later (BNPL) contracts.

Key Provisions Under the NCCP Act

There are a number of important provisions within the NCCP Act.

Licensing Regime

Under the NCCP Act, any entity offering consumer credit must obtain an Australian Credit Licence (ACL), which is issued and overseen by the Australian Securities and Investments Commission (ASIC).

Responsible Lending Obligations

Credit licensees must have adequate processes and procedures in place to ensure that they meet the responsible lending obligations.

A credit product will be unsuitable if it is likely that:

• The consumer will be unable to comply with their financial obligations under the product (e.g. they would not be able to make repayments as they fall due for the term of the product); or
• The consumer will only be able to comply with their financial obligations under the product with substantial hardship; or
• The product will not meet the consumer’s requirements or objectives if the product is entered into or the credit limit under the product is increased (RG 209.8).

Other Obligations for Credit Licensees

Licensees are required to conduct their dealings honestly, fairly, and efficiently. They are required to have internal procedures in place to manage:

• Dispute resolution
• Conflicts of interest
• Consumer data protection and privacy

Consumer Protection Measures

The Act provides a range of consumer protections, including the right to request variations to their credit contracts if they encounter financial difficulties.

Credit licensees must also be members of the Australian Financial Complaints Authority, offering consumers access to independent dispute resolution and redress.

Understanding Responsible Lending Under the NCCP Act

The responsible lending framework is designed to prevent consumers from taking on debt that they cannot repay, reducing the risk of substantial financial hardship. This is achieved by placing an obligation on the lender to ensure they do not enter a credit contract with a consumer if that contract is unsuitable for the consumer.

“Unsuitable” means that the consumer’s financial circumstances are such that they will be unable to make the product repayments (or only be able to with substantial hardship), or that the product will not meet the consumer’s objectives.

To meet their responsible lending obligations, a lender must:

• Make reasonable inquiries about a consumer’s financial situation, their requirements and objectives, including things like the borrowing amount required, the purpose of the loan and any features sought by the consumer
• Take reasonable steps to verify a consumer’s financial situation, including proof of income, current expenses and other debts
• Make an assessment about whether the credit contract is ‘not unsuitable‘ for the consumer, ie: that the customer will be able to make repayments and that the product meets their needs.

ASIC Regulatory Guide 209 (RG209) and Its Role

ASIC is responsible for administering the NCCP Act, including ensuring licensed credit providers follow their responsible lending obligations. To assist in this regulation, ASIC has produced a guide, entitled: Regulatory Guide 209: Credit licensing: Responsible lending conduct (RG 209).

RG 209 provides an explanation of how ASIC interprets the law, and the principles underlying its approach. Also included are practical examples to help lenders understand their obligations and steps lenders can take to minimise the risk of non-compliance with these obligations.

Practical Impact on Lenders and Borrowers

The NCCP Act, particularly the requirement to be licensed, imposes a significant compliance burden on lenders and credit intermediaries. As well as annual reporting and record-keeping obligations, depending on their entity type and nature of activities, a credit licensee may need to provide a borrower with one or more disclosure documents to ensure they understand their rights as credit consumers.

These documents include:

• Credit guide
• Quote for credit assistance
• Credit or lease proposal disclosure document
• Written assessment of suitability, if requested.

Refer to ASIC’s INFO 146 for detailed guidance.

Lenders have periodically lobbied for a reduction to their responsible lending obligations, arguing the complexity of the application process stymies competition and makes it too difficult for consumers to access credit.

In 2021, the Big 4 banks welcomed legislation proposed by then-Treasurer Josh Frydenberg to rollback some of the responsible lending framework. This legislation was ultimately defeated in the Senate and the only changes to the NCCP Act progressed were long-awaited increases to consumer protections in relation to small amount credit contracts and consumer leases.

Responsible lending came under scrutiny again in 2024, with the CEOs of ANZ, NAB and CBA calling on the government to ease rules to improve consumer borrowing power. In response, ASIC conducted an analysis of lending data, determining that consumer access to credit was increasing. The regulator’s determination was that easing the responsible lending obligations would not necessarily result in an increase in affordable credit.

Common Challenges and Compliance Issues with the NCCP Act

While there are numerous enforcement actions pursued by ASIC relating to non-compliance with the NCCP Act, some of the most common relate to failing to meet responsible lending obligations.

Insufficient Unsuitability Assessments

When assessing if a product is “not unsuitable” for a customer, some lenders rely too heavily on borrower declarations rather than verifying income and expenses.

The legislation allows licensees flexibility to determine what is appropriate in individual circumstances. However, in RG 209, ASIC notes that the more complicated the product, or the larger the amount being applied for, the greater the level of detail required by the lender to make an unsuitability assessment.

For example, in December 2024, ASIC announced it was pursuing enforcement action against Swoosh Finance for failing to assess whether the loans were unsuitable for the customers and failing to make reasonable inquiries to verify the borrowers’ financial situations.

Financial Hardship Obligations

In a statement outlining its key issues for 2025, ASIC said it was focused on ensuring that lenders improve the way they support customers experiencing financial hardship. Under the NCCP Act, lenders must comply with hardship obligations, including assessing the customer’s request in a timely manner and providing access to internal/external dispute resolution.

Report 783 (issued in 2024) found that lenders had an inadequate focus on customers hardship, including:

• Failing to make it easy for customers to give a hardship notice
• Difficult assessment processes
• Poor communication between lenders and customers
• Vulnerable customers often weren’t well supported

Overcoming NCCP Compliance Challenges: Training and Education Solutions

Education and training plays a critical role in helping lenders comply with the NCCP Act and its responsible lending obligations. First and foremost, ensuring representatives are adequately trained and competent is a license condition for ACL holders.

A robust training program also:

• Ensures staff understand the law and the consequences of breaching it
• Provides timely updates when laws or regulations change
• Demonstrates a culture of compliance to both the regulator and the wider market
• Reduces the likelihood of compliance breaches
• Improves customer outcomes and ethical decision-making
• Encourages early identification of risks
• Improves the quality of documentation and complaints handling.

Future of the NCCP Act and Responsible Lending

The credit industry in Australia will continue to be shaped by a range of factors. These include social dynamics, such as cost-of-living stress, technological advancements like credit data sharing and AI, as well as shifting regulatory priorities. As the industry evolves, ongoing compliance—through robust systems, staff training, and proactive risk management—will be critical in maintaining consumer trust and meeting legal obligations.

Amidst the changing credit landscape, partnering with a strong education partner will help steer your business towards success.

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