Introduction

The National Consumer Credit Protection Act 2009 (Cth) (‘NCCP Act’) regulates consumer credit activities in Australia, including lending by credit providers & credit assistance from mortgage brokers. Chapter 3 requires credit licensees to make reasonable inquiries, verify financial information & assess whether a credit contract is unsuitable.

The regime covers credit for personal, domestic or household purposes, or residential investment property; predominantly business-purpose loans fall outside responsible lending obligations. The article explains how these obligations differ for lenders & brokers, how the NCCP Act relates to the National Credit Code (Cth) & how mortgage brokers’ best interests obligations apply alongside responsible lending requirements.

What Does the NCCP Act Regulate for Australian Credit Providers & Brokers?

Credit Activities & Credit Licensing

Entities generally need an Australian credit licence or authorisation from a credit licensee before engaging in credit activities, & may seek Australian credit licence application assistance when preparing to do so. The licensing regime under the NCCP Act covers activities such as:

• providing credit under a credit contract or consumer lease;
• benefiting from mortgages or guarantees;
• exercising a credit provider’s rights;
• suggesting a particular credit contract; or
• assisting with an application.

A business may not need its own licence if it acts as an authorised credit representative, relies on an applicable exemption, or receives relief from the Australian Securities & Investments Commission (ASIC). Exemptions can apply to certain activities, including passing on prepared documents or factual information, or referring a consumer to a credit licensee.

When Does the National Credit Code Apply?

The National Credit Code applies to credit provided to individuals or strata corporations for personal, domestic or household purposes, including buying or improving residential property for investment. However, credit provided wholly or predominantly for a business purpose generally falls outside the consumer credit regime, even if an individual provides a home as security.

From 4 October 2026, the National Consumer Credit Protection Amendment (Small Business Exemption) Regulations 2026 (Cth) (‘Small Business Exemption Regulations’) extend the exemption for mixed-purpose small business loans for 10 years. The exemption applies where the loan includes a genuine business purpose that is not minor or incidental, with the small business meeting the relevant employee or revenue threshold.

NCCP Act vs National Credit Code

The NCCP Act establishes the licensing framework for credit providers, brokers & other participants in regulated credit activities. Chapter 3 also contains responsible lending obligations, including restrictions on entering into, suggesting, or assisting with an unsuitable credit contract.

The National Credit Code, contained in Schedule 1 to the NCCP Act, regulates the substantive terms of credit contracts, precontractual disclosure & default procedures. The two parts of the regime address different issues: the NCCP Act regulates licensing & conduct, while the National Credit Code regulates the operation of consumer credit contracts.

What Are the Responsible Lending Obligations for Lenders & Brokers?

Consumer Requirements & Objectives

Credit licensees must make reasonable inquiries into a consumer’s requirements & objectives before assessing a credit product or credit limit increase. Under RG 209.43 of the NCCP Act, those inquiries help identify why the credit is sought, which terms matter to the consumer, & whether the proposed credit contract meets that purpose.

The inquiry should address matters such as:

• the proposed loan amount;
• the term;
• the interest rate;
• the credit limit;
• special conditions; and
• charges & other relevant features.

RG 209.46 explains that this information supports an assessment of whether the credit product matches the consumer’s intended use.

Consumer Financial Situation

Credit licensees must make reasonable inquiries about the consumer’s financial situation & take reasonable steps to verify the information obtained. RG 209.43 of the NCCP Act identifies these as core responsible lending obligations.

Verification is required because information supplied during an application may be affected by mistake, misunderstanding, negligence or deliberate fraud. RG 209.48 explains that relying only on information provided by a consumer or another person is not sufficient where further steps would be reasonable to establish whether the information is reliable.

Assessing Unsuitability

Under RG 209.8 of the NCCP Act, a credit product is unsuitable if it is likely that the consumer will be unable to meet the financial obligations, or could comply only with substantial hardship. The same test applies where the product will not meet the consumer’s requirements or objectives.

If the prescribed test is met, the credit licensee must assess the product as unsuitable. RG 209.9 states that the licensee must not:

• enter into the credit product;
• suggest that the consumer apply for it; or
• assist the consumer to apply for it.

Responsible Lending Obligations for Mortgage Brokers & Credit Assistance Businesses

Preliminary Assessment of Unsuitability

Mortgage brokers must complete a preliminary assessment before providing credit assistance. Under Section 118 of the NCCP Act, the assessment must determine whether entering into a credit contract or increasing a credit limit would be unsuitable for the consumer, applying the same unsuitability test described above.

The broker must use information about the consumer’s financial situation, requirements, & objectives that the broker has reason to believe is accurate.

Reasonable Inquiries & Verification

Mortgage brokers must make the same reasonable inquiries about the consumer’s requirements, objectives & financial situation, & take reasonable steps to verify the financial information obtained, before making the preliminary assessment.

The inquiries & verification must occur within 90 days before the assessment, or within 120 days for a home loan. ASIC guidance in RG 209.120 recognises that brokers may need more detailed inquiries because their role includes:

• identifying suitable lenders & products;
• helping the consumer choose between them; and
• assisting with the application.

Suggesting or Assisting With Unsuitable Credit

Under the NCCP Act, a broker must not suggest that a consumer apply for, or assist the consumer to apply for, an unsuitable credit contract or credit limit increase. The unsuitability test is the same as described above. The responsible lending obligations apply to this regulated conduct when a broker suggests or assists with an application for a credit product or increased credit limit.

Providing the Preliminary Assessment

A consumer may request a written copy of the preliminary assessment from the mortgage broker. Under RG 209.7, the request may be made before or after the broker provides the credit assistance.

The broker must be able to provide the assessment when requested. The document records the assessment of whether the proposed credit contract or credit limit increase was unsuitable based on the information gathered & verified.

Responsible Lending Obligations for Consumer Lenders & Credit Providers

Assessment of Unsuitability

A credit provider must complete a final assessment before entering into a credit contract or increasing its credit limit. Under Section 131 of the NCCP Act, the assessment must determine whether the proposed credit contract will be unsuitable for the consumer.

The assessment must rely on information about the consumer’s financial situation, requirements & objectives that the credit provider had reason to believe was true, or would have believed to be true after making the required inquiries or verification.

Reasonable Inquiries & Verification

Under Section 130 of the NCCP Act, a credit provider must make reasonable inquiries about the consumer’s financial situation, requirements & objectives, & take reasonable steps to verify the consumer’s financial situation, before making the assessment.

RG 209.44 states that these inquiries & verification steps must occur within 90 days before the assessment or regulated conduct. A longer period of 120 days applies to home loans. The information gathered should remain sufficiently current to support the credit provider’s lending decision.

When Credit Is Unsuitable

Under Section 131 of the NCCP Act, a credit contract is unsuitable if it is likely that the consumer will be unable to meet the financial obligations, could comply only with substantial hardship, or would not receive a contract meeting the consumer’s requirements or objectives — the same test described above. A presumption of substantial hardship applies where the consumer could meet the obligations only by selling the consumer’s principal place of residence, unless the contrary is proved.

The assessment must consider both repayment capacity & whether the proposed credit contract is appropriate for the consumer’s stated purpose.

Prohibition on Providing Unsuitable Credit

Under Section 133 of the NCCP Act, a credit provider must not enter into an unsuitable credit contract or increase the credit limit of an unsuitable credit contract, applying the same unsuitability test described above.

A contravention of Section 133 of the NCCP Act is a civil penalty provision carrying 5,000 penalty units. Section 133 of the NCCP Act also creates an offence punishable by up to two years’ imprisonment.

What Additional Duties Apply to Mortgage Brokers?

Best Interests Duty

The Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Act 2020 (Cth) (‘Financial Sector Reform Act’) introduced a statutory duty requiring mortgage brokers to act in the best interests of consumers. Under Section 158LA of the NCCP Act, a licensee must act in the consumer’s best interests when providing credit assistance.

The duty applies to mortgage brokers who are credit licensees, as well as relevant credit representatives providing credit assistance. Section 158LA of the NCCP Act makes the obligation a separate requirement from responsible lending obligations.

Conflict Priority Rule

Under Section 158LB of the NCCP Act, a licensee must give priority to the consumer’s interests when the licensee knows, or reasonably ought to know, that a conflict exists. The conflict may involve the interests of:

• The licensee;
• An associate of the licensee;
• A representative of the licensee; and
• An associate of a representative.

The licensee must not prioritise personal interests, the interests of a credit provider, or the interests of another third party. Section 158LB of the NCCP Act treats this conflict priority rule as a civil penalty provision.

Responsible Lending vs Best Interests Duty

Responsible lending obligations & the best interests duty are separate legal requirements that can apply at the same time. Under RG 273.105–RG 273.107, a mortgage broker who is a credit licensee must comply with both obligations when providing credit assistance.

Responsible lending focuses on assessing whether a credit contract is unsuitable for the consumer. The best interest duty applies more broadly to the broker’s conduct, processes & the appropriateness of the credit assistance. A product may be assessed as not unsuitable under responsible lending requirements yet still fail the best interests duty.

Conclusion

The NCCP Act places connected but separate obligations on credit providers & mortgage brokers, with responsible lending rules directed at unsuitable credit contracts. A business must identify its role in the credit process to determine whether a preliminary assessment, final assessment, or additional mortgage broker duties apply.

For businesses reviewing lending practices, contact AFSL House to request a consultation with our regulatory & compliance specialists. Our team can help clarify the obligations that apply to each credit activity, assess existing compliance processes, & support clearer decision-making for lenders, brokers, & other credit businesses operating in Australia; to discuss the appropriate licensing pathway, contact AFSL House’s lawyers for Australian credit licence application and regulatory assistance.

Frequently Asked Questions