What decides whether a loan is regulated
The National Credit Code applies by purpose, not by lender and not by security. Credit provided to an individual wholly or predominantly for personal, domestic or household purposes is regulated, and so is credit to buy, maintain or improve residential property for investment, or to refinance that credit. Credit for a business purpose sits outside the Code. Where the money does two jobs, the predominant purpose decides it.
Regulated means the consumer protections apply: the licensing regime, responsible lending, the credit guide, hardship provisions and access to AFCA. Unregulated means they do not, and the loan is governed by the contract and by general law instead.
What a declaration does
A business purpose declaration is a signed statement by the borrower that the credit is for business or investment purposes. Where it is validly given, the lender may rely on it. There is a catch written into the law, and the courts have enforced it: the declaration is ineffective if the lender knew, or had reason to believe, the credit was really for a regulated purpose.
In 2025 the Federal Court found that a lender and an introducer had engaged in unlicensed credit activity after relying on business purpose declarations without making reasonable inquiries. The judgment describes loans where nothing in the file supported a genuine business purpose. The lesson for everyone in the chain, including brokers, is that the declaration records a conclusion; the inquiries have to come first.
What that means for you as a borrower
- Be accurate about the purpose. If the money is really for personal use, say so. The right product is a regulated one, and signing a declaration that is not true helps nobody and can unwind the loan.
- Expect questions. A careful lender or broker will ask what the funds are for and want something that supports it: an invoice, a contract, an ABN, a plan. That is the law working as intended.
- Know what you are giving up. No responsible lending assessment, no statutory hardship pathway, and no AFCA complaint right against an unlicensed lender. Read the contract with a lawyer, especially the default and enforcement clauses.
- Security over the family home is still serious. A business purpose loan secured by your home can be enforced against that home. Ask the question plainly before you sign.
How Joshua handles it
Every private deal starts with what the money is actually for and what evidence supports it. Where the purpose is genuinely business or investment, the unregulated market is open and that is usually the fastest route. Where it is not, it is a regulated loan and a different conversation. Nobody is better off with the wrong label on a loan.
Common questions
Is a private loan secured by my home always unregulated?
No. The purpose decides it, not the security. A loan to a person for personal or household purposes is regulated even if it is secured by an investment property, and a genuine business purpose loan is unregulated even when the family home is the security.
Can I complain to AFCA about an unregulated loan?
AFCA membership follows the credit licensing regime, so an unlicensed lender outside the Code is generally not an AFCA member. Some non bank lenders are members anyway. It is a fair question to ask before you sign.
Does buying an investment property count as business purpose?
Not for residential. Credit to buy or refinance residential property for investment is specifically regulated by the Code. Commercial and industrial property is a different matter.
Why does my broker keep asking what the money is for?
Because the law requires reasonable inquiries, and because the Federal Court has made clear that relying on a signed declaration without them is not good enough.
Sources
- National Credit Code, section 13 (business purpose declaration), National Consumer Credit Protection Act 2009 Schedule 1, checked 26 October 2026
- ASIC: FAQs, does the credit legislation apply?, checked 26 October 2026
- ASIC v Green County Pty Ltd and Max Funding Pty Ltd, Federal Court judgment (2025): business purpose declarations and unlicensed credit activity, checked 26 October 2026
- Australian Financial Complaints Authority, checked 26 October 2026
- ASIC Act 2001, Part 2 Division 2 (misleading or deceptive conduct in financial services, which applies to credit facilities), checked 26 October 2026
General information only, not credit advice. It doesn’t take your objectives, financial situation or needs into account. Rules and figures change; check them, or talk to Joshua, before you rely on them.