Is your business growing?
The Compliance Team often get enquiries from brokerages that are employing their own Sales Manager or BDM and want to know if their new employee needs to be an authorised Credit Representative. So let’s take a look.
What is a Business Development Manager?
In the mortgage and finance industry, the primary role of a BDM is to prospect for new clients. They may do this through their social media or business networks, telemarketing, cold calling, advertising or by any other means of generating interest from potential clients or referral sources. Their role is to pitch and influence your target audience to do business with your company.
It is the BDMs responsibility to develop the ‘sales’ pipeline. Their role is to set up meetings between client decision makers and your company’s practice leaders, or in the case of a mortgage broking business, your brokers or loan writers who are authorised Credit Representatives.
The BDM role is not authorised to discuss any specific aspects of a loan transaction, only to identify that there is a need evident with the client and that they would benefit from having a conversation with an authorised Credit Representative. Essentially, a BDM is only a sales person and makes appointments with clients on behalf of your authorised Credit Representatives.
When does a BDM need to be authorised as a Credit Representative?
It is important that a client only discusses their loan requirements in detail with people who are authorised to proceed further into conducting specific credit conversations. However, it is not necessary for your BDM to be an authorised Credit Representative if they are only making appointments for clients to meet with brokers or loan writers who are authorised Credit Representatives.
A BDM does have the ability to meet with a client and ‘collect’ information from them, which can then be provided to the authorised Credit Representative as the next step in the sales process. However, in order to proceed with a loan, an authorised Credit Representative must be the person who contacts the client to commence the ‘credit conversations’ required to get a deeper understanding of their position and finance needs.
(That means, if you want your BDM to do more than just identify and line up appointments with new clients on behalf of your authorised Credit Representatives, then you should appoint someone to the role who is qualified as an authorised Credit Representative).
What does the NCCP Act say about who can have financial discussions with a client?
In our NCCP Legislation (the Act), the following information is clearly set out regarding which people are authorised to have financial discussions with the client. It states ‘You must be covered by an Australian Credit Licence to engage in any credit activity’. Therefore, you must ensure that your sales and support staff are careful not to engage in any activity that may be considered a ‘credit activity’.
‘Credit activities’ may include:
- Providing credit under a credit contract or consumer lease
- Benefiting from mortgages or guarantees relating to a credit contract
- Exercising rights or performing obligations of a credit provider (either as the credit provider or on behalf of another person who is the credit provider)
- Suggesting or providing assistance with a particular credit contract or consumer lease
- Acting as an intermediary between a credit provider and a consumer (for a credit contract).
Any person conducting credit conversations, or conversations that may be perceived by the consumer to pertain to obtaining a particular credit contract or consumer lease, should be aware that there are very strict penalties that apply to a person who unlawfully engages in credit activities or provides unauthorised credit assistance.
What is credit assistance?
Defined in Section 8 of the NCCP 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:
- suggests and/or assists the consumer apply for a particular credit contract with a particular credit provider; or
- suggests and/or assists the consumer apply for an increase to the credit limit of a particular credit contract with a particular lender; or
- suggest that the consumer remain in a particular credit contract with a particular credit provider
- suggests and/or assists the consumer apply for a particular consumer lease with a particular lessor; or
- suggests that the consumer remain in a particular consumer lease with a particular lessor.
You should also take into consideration that any person providing credit assistance to a client, as per the information outlined above, must be accredited by the specific lending institution in order to facilitate product and policy conversations with a client. The lenders will not accredit a person who is not an authorised Credit Representative of an ACL holder.
Just to reiterate – under no circumstances should an unauthorised person be engaging in credit activities or providing credit assistance to a client, irrespective of who they are! The implications of non-compliance for your business have the potential to be quite severe.
Contact the Compliance Team with any questions.
If you have any questions, the Compliance Team will be happy to help. Get in touch by clicking on your help icon in Mercury or email us at firstname.lastname@example.org