When credit contract must be assessed as unsuitable
131 When credit contract must be assessed as unsuitable
Requirement to assess the contract as unsuitable
The licensee must assess that the credit contract will be unsuitable for the consumer if the contract will be unsuitable for the consumer under subsection (2).
Civil penalty: 5,000 penalty units.
Even if the contract will not be unsuitable for the consumer under subsection (2), the licensee may still assess that the contract will be unsuitable for other reasons.
Particular circumstances when the contract will be unsuitable
The contract will be unsuitable for the consumer if, at the time of the assessment, it is likely that:
the consumer will be unable to comply with the consumer’s financial obligations under the contract, or could only comply with substantial hardship, if the contract is entered or the credit limit is increased in the period covered by the assessment; or
the contract will not meet the consumer’s requirements or objectives if the contract is entered or the credit limit is increased in the period covered by the assessment; or
if the regulations prescribe circumstances in which a credit contract is unsuitable—those circumstances will apply to the contract if the contract is entered or the credit limit is increased in the period covered by the assessment.
For the purposes of paragraph (2)(a), it is presumed that, if the consumer could only comply with the consumer’s financial obligations under the contract by selling the consumer’s principal place of residence, the consumer could only comply with those obligations with substantial hardship, unless the contrary is proved.
For the purposes of paragraph (2)(a), a consumer is taken to be able to comply with the consumer’s financial obligations under a contract only with substantial hardship if:
the contract is a credit card contract; and
the consumer could not comply with an obligation to repay an amount equal to the credit limit of the contract within the period determined by ASIC under section 160F.
Information to be used to determine if contract will be unsuitable
For the purposes of determining under subsection (2) whether the contract will be unsuitable, only information that satisfies both of the following paragraphs is to be taken into account:
the information is about the consumer’s financial situation, requirements or objectives, or any other matter prescribed by the regulations under paragraph 130(1)(d) or (e);
at the time of the assessment:
the licensee had reason to believe that the information was true; or
the licensee would have had reason to believe that the information was true if the licensee had made the inquiries or verification under section 130.
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