The responsible lending obligations under the National Consumer Credit Protection Act 2009 (NCCP) that apply to credit providers (lenders) and credit assistance providers (brokers) marked a new era of professionalism in the finance industry.
The NCCP Act provides the opportunity for brokers to build stronger client relationships and to develop a profession that consumers will increasingly come to value and rely upon.
These obligations apply to all regulated consumer loans, and includes Asset Finance Loans.
Three key steps
To meet your Responsible Lending obligations requires you to undertake three key steps:
- Make reasonable inquiries about the consumer’s financial situation, requirements, and objectives.
- Take reasonable steps to verify the consumer’s financial situation.
- Make a preliminary assessment of whether the credit contract is ‘not unsuitable’ for the consumer.
Reasonable enquires - what does this mean?
The level and type of inquiries you make for each client will vary depending upon the circumstances, including the client’s own answers to questions within the Needs Analysis. If during the course of your analysis, you uncover matters that may impact a decision to provide credit to that particular client, you may need to make further inquiries to ensure that the product is not unsuitable.
What is credit assistance?
Defined in Section 8 of the Act, a person provides ‘credit assistance’ to a consumer if, by dealing directly or indirectly with a consumer in the course of, as part of, or incidentally to, a business carried on this jurisdiction by the person, the person:
a) suggests and/or assists the consumer apply for a particular credit contract with a particular credit provider; or
b) suggests and/or assists the consumer apply for an increase to the credit limit of a particular credit contract with a particular lender; or
c) suggest that the consumer remain in a particular credit contract with a particular credit provider; or
d) suggests and/or assists the consumer apply for a particular consumer lease with a particular lessor; or
e) suggests that the consumer remains in a particular consumer lease with a particular lessor.
Who does the NCCP Act cover?
The question to ask is "who is the borrower and what is the loan purpose?"
If the borrower is a company or a trust (other than a strata corporation) then the loan will not be regulated (i.e. it will not be covered under the NCCP Act).
If a borrower is a natural person or a strata corporation and the purpose of the loan is for personal, domestic or household use, or for residential investment, then the loan is regulated and requirements under the NCCP Act apply.
Compliance Wizard in Mercury
The Compliance Wizard within ‘Mercury 5’ consists of six key documents:
- Credit Guide ‘Connective Credit Rep’
- Quote
- Needs Analysis
- Preliminary Assessment
- Credit Proposal Disclosure
- Broker Checklist and Declaration.
Dealing with Customers - Checklist for adherence to responsible lending obligations
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Action |
Compliance document |
Description |
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Initial Client Discussion |
Credit Guide |
As soon as it becomes apparent that you are likely to provide credit assistance, you must provide your client with the Credit Guide (includes privacy statement) and then record how and when you provided it. |
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Charging the Client for your Services |
Credit Quote |
If you charge a fee for your services/advice, you must provide a quote to your customer. The quote must be signed and dated, then a copy provided to the client and a copy held on file. The Quote can be completed and signed between the time period of providing the Credit Guide (initial discussion) and the Credit Proposal (recommendation). If you do not charge a fee, then you are not required to complete a Quote. |
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Undertake Fact Find
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Needs Analysis |
To be completed regardless of whether you are assisting a new or an existing client (an existing client’s circumstances may have changed even in a short period of time). The information captured in this questionnaire will form the basis of any recommendation you make to your customer. It’s also evidence that you made reasonable and appropriate enquiries. |
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Do your research and complete the three calculations. |
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Prepare Recommendation |
Preliminary Assessment |
You must be able to prove that you conducted a preliminary assessment of suitability before you assist your client to submit a loan application. You don’t have to provide a copy of this document unless the client requests it from you.
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Present Recommendation |
Credit Proposal Disclosure |
At the same time you suggest your customer apply for or assist in applying for a particular loan, you must also provide the Credit Proposal Disclosure which contains information about the proposed lender/loan product(s); fees and charges your customer is liable to pay you and the lender for applying for the loan (such as application and valuation fees); commissions you will receive from the lender and the amount of commissions you will pay third parties such as referrers (if applicable).
This must be signed and dated *Acknowledging Insurance offering and Acceptance of Loan proposal, then a copy provided to the client and a copy held on file. |
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Adherence to NCCP |
Broker Checklist and Declaration |
Prior to submitting the loan application(s) to the recommended lender, the checklist and declaration is completed confirming your adherence to NCCP, AML, Privacy, compliance and supporting documentation requirements. |
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Implement Recommendation |
Lender Application |
Assist your customer to complete the loan application, then submit with all the required supporting documentation as per lenders checklist. Keep a copy of the application and supporting documents in the client file. |
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Record Management |
File Notes |
It is a requirement to hold all notes, emails and copies of messages (collectively “communication”) on the opportunity. Communication is not only limited to the client interaction and includes any communication with the lender, valuer, Solicitor, Accountant or any other party involved in the transaction. Conversations held with the customer should be documented by either a note, or a confirmatory email to the customer. Your communication should also include documentation of the: - Reason the consumer selected the chosen lender (from your recommendation of several lenders) - The consumer’s needs, requirements, objectives and how your recommended products meets the consumer’s requirements - Any assumptions made by you during the credit assistance process - What steps were taken to verify the customer’s financial position including |
MERCURY - Mandatory compliance documents required
- Credit Guide ‘Connective Credit Representative’.
- Quote - signed copy only if charging a fee for your services.
- Needs Analysis ‘under Questionnaire tab’.
- Preliminary Assessment - completed: Client / Funding Position / Product Comparison / Needs Analysis.
- Credit Proposal Disclosure - signed copy.
- Checklist and Declaration ‘under Questionnaire tab’.
MERCURY - Mandatory supporting documents required
| A – Your client |
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| B – Income type | PAYG Customers
Sole traders
Partnership
Trust
Company
Note: Tax File Numbers must be removed from income/financial statements and documentation. SELF EMPLOYED – ALTERNATIVE DOCUMENTATION LOANS
Note: (*) If the customer has been self-employed for less than 6 months, please contact the Compliance Team for additional guidance. Note (**) If the lender requires a declaration from the accountant on a specific form, this can be accepted by Connective in lieu of the letter. Please ensure that the minimum details as outlined above are included on the form. If there is information Connective requires, a mitigating note can be made including this information. OTHER income types: For customers who do not meet any of the above types of income, consider the following:
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| - Opportunity Purpose | Purchasing
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These are mandatory documents, however, you should obtain all documents required to verify a client’s individual financial situation and any additional documents required by the lenders.
MERCURY – Detailed summary of supporting documents
IDENTIFICATION (All applicants)
Photographic identification to meet Anti Money Laundering (AML)/ Counter-Terrorism Financing (CTF) Legislation, and Verification of Identify (VOI) requirements.
Mandatory Identification Documents
At least One (1) Item from Part A OR
At least One (1) Item from Part B + One (1) from Part C (refer below):
Identification must also be collected in adherence to subject Lender specific requirements
Document types:
Part A: Primary Photographic
- A current Drivers Licence
- A current Australian passport (or one which has expired within the last two years)
- A current Proof of Age Card issued by an Australian State/Territory (including 18+ Cards)
- A current foreign passport or similar travel document, a national identity card also containing your signature issued by a government, the UN or agency of the UN.
Part B: Primary Non-Photographic
- A current Drivers Licence (without photograph)
- An Australian birth certificate/extract
- A citizenship certificate
- A foreign birth certificate issued by a foreign government, the UN, or agency of the UN
- A current Centrelink Pension Card
Part C: Secondary
- Current Medicare Card
- Current Credit/Debit ATM Card (issued by an Australian Financial Institution)
- Other Financial Institution records issued within the last 3 months (e.g. Bank Statement, Passbook, Term Deposit Certificate)
- Current Tertiary Education Identity Card with Photo (e.g. Student Card)
- Current Government Issued Identity Card with a Photo
- A notice issued by the Australian Taxation Office within the last twelve months recording a debt payable to or by you under a Commonwealth taxation law (e.g. Tax Assessment Notice)
- A notice issued by a local Australian Government Entity or utility provider within the last three months recording the provision of services to you at your residential address (e.g. Rates Notice, Gas, Electricity, Phone)
Document collection standard:
Original documents must be sighted and copied, photocopies are not acceptable. If unable to sight original documents in person, then Certified Copies of identification documents are required prior to providing credit assistance. Document copies must be good quality and legible.
Full Name, Address and Date of Birth where shown on identification documents, must be in English or translated by an authorised translator (NAATI)
Unless otherwise indicated, only current ('in date') identification is acceptable
TRANSACTION ACCOUNT STATEMENTS (All applicants)
Three months of transactional banking account statements (irrespective of the purpose of borrowing) to:
- Confirm details of where their pay has been deposited.
- Provide evidence of additional income, regular deductions, and commitments.
- Assist to identify client’s monthly living expenses.
LENDERS APPLICATION
It is best practice to keep all documentation relating to a lender application in Mercury. Submission Checklist; Broker & Client consent/declaration forms, Servicing Calculator and any other documents associated with the loan transaction to be saved in Mercury.
PAYG APPLICANTS:
Latest payslips (at least one).
What if your client does not receive payslips?
PAYG summary, ATO notice of assessment, or full tax return.
A letter from the employer noting the following must be supplied: (A) employment status (full time, part time), (B) gross annual income, (C) year to date gross and net amount, (D) payment frequency i.e. fortnightly; and (E) gross and net amounts per payment frequency. This letter must be on company letterhead.
CLIENTS WHO ARE PURCHASING A PROPERTY
Three months dedicated savings history via bank statements; and/or
Statutory declaration if funds are being gifted and/or
Evidence of equity
NOTE: Evidence of funds to complete must be saved in Mercury. Purchase contract should be collected to verify purchase price.
CLIENTS WHO ARE REFINANCING
3 Months statements for all loans being refinanced (minimum).
CLIENTS WHO ARE CONSTRUCTING A PROPERTY
Three months dedicated savings history via bank statements; and/or
Statutory declaration if funds are being gifted and/or
Evidence of equity
NOTE: Evidence of funds to complete must be saved in Mercury. Purchase contract should be collected to verify purchase price of land and Building Contract to verify the cost of construction
ADDITIONAL DOCUMENTS
You should obtain any additional documents:
- To support and verify the individual client's financial situation and
- Those required by the lenders
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