This fact sheet is for information only. You should get legal advice about your personal situation.

Main ideas

• Credit providers have ‘responsible lending obligations’.

• Credit providers must check that any credit they provide meets your needs and is affordable.

• Get legal advice if you think you may have been given credit ‘irresponsibly’.

In this fact sheet:

Credit providers must lend responsibly
• When credit must be assessed as unsuitable

Problems with assessing credit suitability

What to do if you received credit that was unsuitable
• Get information
• Consider the circumstances when you were given credit
• Complain

If a credit provider did not lend responsibly
• If the credit was unsecured
• If the credit was secured
• If you did not receive any benefit

Credit providers must lend responsibly

Before giving you a loan or a consumer lease, credit providers (and people who assist you to apply for a loan, like brokers) must ask questions and check information to assess whether they can give the loan or provide credit. A creditor includes lenders (like banks, car finance companies, non-bank companies who provide small case loans), lease providers and buy now pay later providers.

Since January 2011, responsible lending obligations apply to loans/leases (and increases to loans/leases) offered by banks. These obligations have applied to other providers since June 2010. The obligations only apply to loans or leases regulated under the National Consumer Credit Protection Act 2009 (Cth) (National Credit Act). Since 10 June 2025, BNPL products are regulated under the National Credit Act. Read our fact sheet about the National Credit Act to find out when it applies.

Creditors must therefore:

• ask reasonable questions about your needs and goals
• ask reasonable questions about your financial circumstances (such as your income and expenses, assets and debts)
• take reasonable steps to check the information you gave about your financial circumstances is correct (such as by asking for payslips or Centrelink income statements or bank statements).

What is reasonable depends on many different factors. For example, the product type, amount of credit, length of the agreement and your situation. ASIC’s Regulatory Guide 209 describes what is reasonable.

Lenders also have extra checks for:

1. Credit cards. Since 1 January 2019, lenders must check you can repay the full credit limit within 3 years. Previously, credit card companies only checked whether you could afford the minimum repayments if you reached the credit limit (usually 2% or 3% each month).
2. Small cash loans. These are loans under $2,000 and for less than a year. Read our fact sheet about Easy cash loans.
3. Consumer leases. Since 12 June 2023, consumer lease providers must get copies of your bank account statements for the last 90 days to check you can afford the lease and to check that you are not paying more than 10% of your net income towards all your consumer leases. Read our fact sheet about Consumer Leases.
4. Buy now pay later (BNPL). Since 10 June 2025, responsible lending obligations apply to BNPL products. BNPL providers can choose to opt in to a new ‘modified’ responsible lending framework where the suitability assessment requirements may be reduced depending on certain risk factors. Read our fact sheet about BNPL.

When credit must be assessed as unsuitable

Credit is unsuitable if, at the time of the assessment:

• you could not make the repayments, or could only make the repayments with substantial hardship (for example, by missing out on essentials like groceries)
• the credit did not meet your needs and goals.

Problems with assessing credit suitability

Common problems when assessing the suitability of credit include:

• The credit provider used a living expense figure that was much lower than your actual living expenses.
• The credit provider did not include all your debts (such as repayments on other loans).
• The credit provider overestimated your income (for example, by not accounting for deductions from your Centrelink payment, or using one-off or uncertain bonuses).
• The credit provider did not consider likely future changes to your financial position (for example, not taking into account that you are going to retire soon).
• The credit provider didn’t consider how you would pay the final balloon payment on a car loan.
• The lender added you as a co-borrower but the credit was actually for someone else. If you were experiencing family violence of any form, read our fact sheet about Financial Abuse and Family Violence for information and options.

What to do if you received credit that was unsuitable

If you are struggling because of credit that wasn’t suitable, you can complain.

Get information

Ask the credit provider for your application form, verifying documents, and a copy of their assessment.

Ask the lender how they decided that you could afford the credit. People tend to underestimate their expenses, so ask the lender if they compared your estimated living expenses to your actual spending (for example, by looking at your bank account statements).

Also ask if the lender used a benchmark, such as the Household Expenditure Measure (HEM) or the Henderson Poverty Index (HPI). These benchmarks estimate how much your living expenses are based on factors like how many dependents you have, where you live or if you work. It is important to check your lender used the right information for your household.

Benchmarks can be a useful shortcut for lenders to check if your declared living expenses are realistic for someone in your situation but should not replace your actual living expenses.

For example, you might estimate your living expenses are $500 a week. The HPI or HEM benchmarks say someone in your situation needs $600 a week to live on. The lender could use the $600 a week figure as a starting point to work out what to lend you. But the lender must use your actual living expenses. If your bank account statements show you spend $640 a week in living expenses, then the lender should use $640 a week.

Read our fact sheet about Getting Loan Documents and use our Requesting Documents sample letter.

Consider the circumstances when you were given credit

Think back to the time when you applied for credit. Consider:

• Was the credit product what I wanted?
• Was I prepared to accept the terms of the agreement so I could get credit?
• Did the credit meet my needs and goals?
• Could I afford the credit without hardship (like giving up groceries)?
• Was I asked about why I wanted the credit product?
• Was I asked about what kind of terms I wanted in the contract?
• What was I asked about my financial position? Did they ask about:
  • my income?
  • my living expenses?
  • my accommodation expenses?
  • my other loans and liabilities?
• How did the credit provider check this information? Did they ask for copies of:
  • my payslips or Centrelink statement?
  • my bank statement?
  • my credit report?
• What was my actual financial position at the time I entered into the contract? How much did I have left over at the end of every month? What was:
  My income
  Less accommodation expenses
  Less living expenses
  Less existing loan repayments
  Less the new loan repayments
• Did I give the credit provider any false or misleading information? Did I give them any forged documents? If you have any concerns, get legal advice.

Consider whether you agree with the credit provider’s assessment that the credit was suitable for you. If not, why?

Complain

If you have given the lender false information, get legal advice first. Generally, mistakes or a miscalculation on your application are okay. However, if you intentionally or recklessly lied or used forged documents, get legal advice as it can be a criminal offence, like ‘obtaining money by deception’. Legal advice is confidential – you can then choose what steps to take next.

Get legal advice about the outcome you can expect, and whether you should continue payments while your complaint is ongoing. Complaints take time to resolve.

Complain first to the credit provider’s internal dispute resolution team. Contact details are available on the AFCA website. Use our Responsible Lending sample letter.

If you cannot resolve the matter with the credit provider, you can complain to AFCA. Complaining to AFCA is free. Read our fact sheet about Financial Complaints to AFCA.

If a credit provider did not lend responsibly

If the credit provider did not lend responsibly and the credit product was unsuitable, the outcome depends on a few different factors. Get legal advice about your situation.

Generally, the idea is to put you back in the same position you would have been in if the credit was never approved. This means that the credit provider should not profit from the unsuitable credit, and you should pay for the benefit you received.

If the credit was unsecured

Generally:

• You should repay the benefit (the amount you spent) through an affordable payment arrangement.
• Any payments you have already made should come off the benefit amount. If you have already paid more than the benefit, ask for a refund of the difference.
• The credit provider waives or removes any fees and interest.

If the credit was secured

If a house or car was purchased using the loan money, calculating the benefit you received can be complicated.

For example, for a home loan that was used to buy a property:

• You may need to sell the property (since you could not afford it in the first place). But if the mortgage is very small, and you can repay the rest quite quickly, you may be able to negotiate a repayment arrangement.
• The credit provider may compensate you for losses, less any benefits you received.
  Your losses could include stamp duty, purchase costs, and interest.
  Your benefits could include what you would have paid in rent, and increases to the value of the property

Sometimes there may be no loss; property price increases may be the same as all losses.

Get legal advice, these calculations can be complicated –especially if there were refinances or extra advances involved.

If you did not receive any benefit

If you clearly did not receive any benefit from the credit, the outcome may be:

• The credit provider releases you from the debt.
• The credit provider refunds all payments you made.

Some situations where this may occur are where:

• you were forced into a loan because of family violence or financial abuse, read our fact sheet for more information
• you were misled into signing documents putting you down as a borrower for someone else’s loan.

Whether the credit provider knew or should have known about the problem is often a relevant factor.

Get legal advice, as the outcomes will change depending on your situation.

If you are in NSW, you can ring our Credit & Debt Legal Advice line on 1800 844 949.

Need more help?

For a list of other resources, read our Useful Links page.

Last updated: August 2025