Uncertainty about the application of the responsible lending rules under National Consumer Credit Protection has made lenders cautious in their handling of non-standard credit applications.Brokers and lenders on a panel at yesterday's Credit Law Compliance conference, held in Sydney, agreed that the new rule, which has been in force since January 1, has made lenders "nervous" and "conservative".The responsible lending rules require credit providers to be satisfied that the loan they offer a borrower is "not unsuitable". There are two parts to this test: making sure the repayments do not be put the borrower in a position of financial hardship; and that the loan should meet the borrower's objectives.Mortgage Choice's compliance manager, Tim Donahoo, said: "We have cases of clients who received pre-approval before January 1 but when they found their property this year they could not get their loan approved."They did not qualify under the lender's interpretation of responsible lending."Westpac's counsel, Cameron Ball, said: "We see a tendency towards conservatism at the moment."The head of compliance and ethics at American Express Australia and New Zealand, Graeme Alexander, said that where, in the past, lenders would take a pragmatic approach to an application, now they would take a more legalistic approach.Alexander gave the example of a person applying for a credit card; the applicant has no income but the spouse has a large salary.He said: "Until recently, we would have taken the pragmatic approach and signed the applicant up. Now we look at the fact that the card contract does not have joint and several liability and we worry about how the decision to sign up a person with no income would look to a dispute resolution body if there was a default and a complaint."Ball said lenders also worried about advancing funds to older borrowers who relied on selling their house to pay off a loan. "The lender has to use a crystal ball and if things go wrong that analysis will be called into question," he said."No lender wants to be in that position,"One reason for this conservative trend in credit approvals is uncertainty about the stance that will be taken by external dispute resolution bodies and the Australian Securities and Investments Commission in interpreting the new law when complaints arise.