People applying for loans may have to provide even more detailed information about their spending as banks step up their verification of borrowers' financial positions.
While banks have strengthened their lending standards and reduced their reliance on a benchmark household expenditure measure, the financial regulator will make it clear they must take steps to actually verify a consumer's financial position.
The Australian Securities and Investments Commission says benchmarks can be useful tools but are not a replacement for making inquiries about a particular consumer's income and expenses.
"A benchmark figure does not provide any positive confirmation of what the particular consumer's income and expenses actually are," ASIC said in a consultation paper released on Thursday.
"The most commonly used expense benchmark, the HEM, reflects 'low-budget' spending and it is expected that many consumers would in fact have higher living expenses."
Lenders would therefore have to ensure the benchmark figure being used was a realistic figure and apply a reasonable buffer amount, ASIC said.
ASIC will update its responsible lending guidance to clearly spell out what it expects of lenders when someone applies for a mortgage, personal loan or credit card.
The regulator plans to tell lenders they should generally use readily available forms of verifying information.
If they choose not to do so, the lender will have to be able to explain why they did not obtain or refer to the information.
ASIC said it is aware of a number of instances where lenders do not obtain or have regard to readily available forms of verification such as bank statements.
"We have observed situations where a bank statement is relied upon to verify income, while information about the consumer's material expenses is ignored," it added.
ASIC's additional suggestions for verifying customers' information includes using bank statements to check income and spending patterns, as well as payments such as pay TV, sports activities, extra telephone or internet costs and gambling accounts.
