Financial Services Snapshots

Consumer Credit

AFCA provides updates to its Responsible Lending Approach

On 11 July 2025, AFCA announced a series of changes to its Responsible Lending Approach (the Approach), following a consultation process that began in February 2025. The feedback received focused on five key areas:

• Early resolutions: Stakeholders confirmed that the Approach has facilitated earlier resolution of responsible lending complaints, sometimes before matters reach AFCA or require a final determination;
• Consistency: Stakeholders expressed a desire for AFCA to apply the Approach more consistently and to provide clearer explanations of how it is used in individual cases;
• Loss calculations: There were calls for more explicit guidance on the calculation of losses, including interest rates (e.g. what interest rate applies to secured adjusted debts and when interest is applied to compensation), what is considered a loss (e.g. acquisition, sale or holding costs and deposits paid) and what is considered a benefit (e.g. crystallised capital gains);
• Serviceability assessments: Requests were made for greater detail on how different factors should be factored into assessing serviceability (e.g. where declared living expenses are below benchmark, verifying closure of existing loans and the interest rate buffers that should be applied to existing loans);
• Scope: Some stakeholders sought an expansion of the Approach to cover additional topics, such as unjust transactions and broker conduct. AFCA has decided not to broaden the document at this stage but will consider alternative ways to provide further guidance.

In response to this feedback, AFCA has updated the Approach to address stakeholder concerns and enhance clarity for both consumers and financial firms. The revised Approach now:

• incorporates the new Low-Cost Credit Contracts regulatory regime, including the new Regulatory Guide 281 Low cost credit contracts (RG 281);
• provides guidance on resolving inconsistencies between expense benchmarks, declared expenses, and verification materials;
• clarifies the application of interest rate buffers to residential mortgage loans;
• updates the loss calculations table with illustrative examples; and
• clarifies the treatment of costs and capital gains or losses in relation to home loans.

These changes are intended to ensure the Approach remains relevant, practical, and transparent, supporting fair outcomes in responsible lending complaints.

See: Media Release; AFCA Approach to Responsible Lending; RG 281

Financial Advice

ASIC consults on extending digital disclosure relief

On 9 July 2025, ASIC commenced consultation on proposals to renew two significant legislative instruments that permit the electronic delivery of financial services disclosures:

• ASIC Corporations (Facilitating Electronic Delivery of Financial Services Disclosure) Instrument 2015/647; and
• ASIC Corporations (Removing Barriers to Electronic Disclosure) Instrument 2015/649

Both instruments are due to expire on 1 October 2025. ASIC is proposing to extend their operation for a further five years, enabling financial services providers to continue issuing Product Disclosure Statements electronically.

In addition, ASIC is inviting feedback on proposed updates to Regulatory Guide 221 Facilitating digital financial services disclosures (RG 221), which explains how digital disclosures should be made. The suggested amendments include simplifying the language, updating references to legislative instruments, consolidating guidance on digital disclosure practices, and providing refreshed examples to clarify that ASIC does not require any particular digital delivery method.

These proposed changes are designed to ensure that the guidance on digital disclosure remain effective, up to date and fit for purpose. Stakeholders are encouraged to review the draft guidance and submit their feedback by 6 August 2025.

See: Media Release; RG 221

Banking

ASIC proposes to remake deposit product disclosure relief instrument

On 3 July 2025, ASIC announced its intention to renew the ASIC Corporations (Deposit Product Disclosure) Instrument 2015/683. This instrument exempts deposit products from certain disclosure requirements, specifically removing the requirement to include interest rates in Product Disclosure Statements (PDS) and termination values in periodic statements.

The current instrument is set to expire on 1 October 2025, and ASIC considers the relief both effective and necessary, proposing to remake it in its existing form. No consultation paper has been issued for this process.

The relief is intended to ease the administrative burden on ADIs by removing the need to update PDS' each time interest rates change, provided customers are clearly informed about how to access current rates. It also makes it easier for ADIs by not requiring them to include termination values in periodic statements, although any early termination fees or limits must still be disclosed in the PDS.
ASIC is seeking feedback on this proposal by 24 July 2025.

See: Media Release

APRA releases consultation paper on removal of AT1 capital

On 8 July 2025, APRA released a consultation paper on implementing the removal of Additional Tier 1 (AT1) capital from the bank prudential framework, effective from 1 January 2027. This follows extensive consultation and was prompted by the failure of AT1 instruments during the 2023 overseas banking turmoil.

The reforms aim to:

• Improve capital effectiveness in crises by reducing complexity and uncertainty;
• Reduce compliance costs by simplifying the capital framework and removing AT1-related burdens; and
• Enhance proportionality by reducing capital costs for smaller banks.

APRA is consulting on technical amendments to implement this change, including updates to prudential and reporting standards and practice guides. The key changes are as follows:

• Elimination of AT1 from minimum capital requirements, with recalibration of Common Equity Tier 1 (CET1) and Total capital requirements;
• Existing AT1 instruments will be reclassified as Tier 2 capital until their first call date, but no later than 2032; and
• Removal of references to AT1 and Tier 1 throughout the framework.

Other proposals involve calculating leverage and exposure limits on a CET1 basis, not introducing a new subordinated Tier 2 tranche, and ceasing recognition of AT1 at the group level for Level 3 banking non-operating holding companies (NOHCs). Overall capital requirements for banks will remain unchanged.

APRA is seeking feedback on the technical amendments required to implement these changes by 5 September 2025. The finalised framework will take effect from 1 January 2027, with all AT1 instruments phased out by 2032.

See: Media Release; Consultation Paper

Payments

RBA releases consultation paper on Merchant Card Payment Costs and Surcharging

On 15 July 2025, the RBA released a consultation paper as part of its ongoing Review of Merchant Card Payment Costs and Surcharging (Consultation Paper). This follows an earlier round of public consultation that commenced with the release of the Issues Paper in October 2024.

The key proposals outlined in the consultation paper are as follows:

• Eliminating surcharging on eftpos, Mastercard, and Visa cards: With the decline in cash usage and the widespread adoption of uniform surcharges across debit and credit cards, there is less of a rationale for surcharging. The Consultation Paper considers that the removing of surcharges will simplify payments, improve transparency, and foster greater competition within the card payments sector.
• Reducing the cap on interchange fees paid by businesses: The Consultation Paper notes that proposed changes could save businesses around $1.2 billion annually in interchange fees. New caps on foreign interchange fees would also help reduce costs for businesses accepting international cards.
• Mandating a requirement for card networks and large acquirers to publish fees: Increased transparency is intended to enhance competition by making it easier for businesses to understand and compare fees.

The RBA is inviting feedback on these proposals and the accompanying draft standards by 26 August 2025. This input will help shape the final reforms, which aim to ensure a safe, competitive, and efficient payments system. The RBA intends to publish its conclusions and an implementation timeline for any regulatory changes by the end of the year.

See: Media Release; Consultation Paper; Issues Paper

Fintech

ASIC grants regulatory relief and announces industry participants for Project Acacia

On 10 July 2025, Project Acacia, led by the RBA and the Digital Finance Cooperative Research Centre (DFCRC), announced the industry participants selected to pilot innovative settlement solutions for tokenised assets in Australia. This initiative, which forms part of the Government’s March 2025 Statement on Developing an Innovative Australian Digital Asset Industry, seeks to explore how digital money and emerging technologies can improve the settlement of tokenised assets in wholesale financial markets.

A total of 24 use cases have been selected: 19 will involve live transactions using real money and real asset transactions, while 5 will be proof-of-concept use cases involving simulated transactions. These trials will cover a range of asset classes, including bonds, private markets, trade receivables, and carbon credits, and will utilise stablecoins, bank-issued deposit tokens, and a pilot wholesale central bank digital currency (CBDC) across multiple blockchain platforms.

Major Australian banks (ANZ, Commonwealth Bank, Westpac) and fintech firms (such as Fireblocks, Canvas Connect, and Zerocap) are among the principal participants. To facilitate these trials, ASIC has granted regulatory relief, enabling the safe and controlled testing of these new settlement approaches. The testing period is set to run for six months, with a comprehensive report on the project’s outcomes anticipated in early 2026.

See: Media Release; March 2025 Statement