Move highlights growing regulatory focus on non-bank mortgage lending
Pepper Money has become the first non-bank lender to be approved as a member of the Australian Finance Industry Association’s (AFIA) Finance Industry Code of Practice.
The AFIA Code sets out standards intended to protect customers, improve disclosure and support responsible and sustainable finance across the industry. It will come into force on October 1, 2026, after a transition period that gives participating firms time to align systems, policies and processes with the new commitments.
“The AFIA Code puts customers first,” said AFIA chief executive Diane Tate. “It is designed to ensure positive outcomes by promoting good industry practices, supporting compliance with legal obligations, and strengthening trust and confidence in Australia’s finance industry.
“Pepper Money’s decision to sign-on early demonstrates how responsible lenders already operate to high standards and are committed to continuous improvement in their DNA. This serves as an example of the significant impact the AFIA Code will have on raising standards throughout the industry. As additional members join, its influence will continue to grow.”
Pepper Money has been involved in the development of the Code through participation in AFIA working groups, alongside other non-bank lenders. The lender’s role is also reflected in the position of its chief executive, Mario Rehayem (pictured top), who has served as AFIA chair since March 2024.
“For more than 25 years, Pepper Money has built its reputation on really helpful, responsible lending,” Rehayem said. “By formally signing the AFIA Code, we’re reinforcing the customer first standards that already guide the way we lend. This is about strengthening protection for customers and raising expectations across the non-bank lending sector.”
Non-banks’ expanding role in mortgage distribution
The introduction of the AFIA Code comes as non-bank lenders take a larger share of mortgage originations, particularly via the broker channel.
According to the Reserve Bank of Australia’s April 2025 Financial Stability Review, non-bank lenders have expanded as banks have tightened lending standards and faced regulatory constraints on credit growth. In 2024, the major banks’ share of broker-originated home loans fell below 40%, declining to about 36%, with brokers placing more business with regional banks, international banks and non-bank lenders.
AFIA’s inaugural Residential Mortgage Non-Bank Lenders (RNBL) report found that non-bank lenders enabled 51,000 Australians to purchase a home in FY25, with $72.2 billion in home loans written across surveyed AFIA members.
The RNBL report also highlighted portfolio performance and hardship outcomes in the non-bank sector. Early-stage arrears were reported at 0.67%, close to major banks’ early arrears of 0.58%. For loans more than 90 days past due, the rate was lower among non-banks at 0.81%, compared with 1.10% for major banks. More than four in five hardship applications to RNBLs were approved, reflecting a willingness to support customers experiencing financial stress.
AFIA noted that non-bank lenders are licensed credit providers, subject to consumer regulation and operating within frameworks overseen by multiple regulators, including the Australian Securities and Investments Commission (ASIC).
What the Code means for customers and lenders
“The AFIA Code gives customers greater clarity and confidence,” Rehayem pointed out. “It makes existing protections more visible, and ensures a higher, more consistent level of customer support across our industry.”
The Code will be supervised by the independent Finance Industry Code Compliance Committee (FICCC), which will monitor adherence to its standards.
“This is a positive step for our industry and a win for customers,” Rehayem added. “We’re proud to lead by example and support a more transparent, resilient and customer focused non-bank lending sector.”
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