The Combined Industry Forum (CIF) has made a recommendation that brokers should publish certain information to their customers. As a member of Connective, you are required to implement these recommendations.
The CIF recommends that you provide your customers with the following information:
- A list of residential lenders available to you via Connective’s panel and, of those residential lenders, which ones you hold an accreditation with (in respect of the previous financial year).
- The number of lenders you have used in the previous financial year
- Top 6 lenders and % of your business written with them in the previous financial year.
This information relates to settled loans from the previous financial year, so it will only require updating on 1 July of each year. Connective will update the Credit Guide MASTER templates, so when you select the appropriate ‘Credit Guide’ your individual data will automatically populate.
The data we provide for you is only based on Connective’s panel of lenders. For any lenders used that are not on Connective’s panel, you will need to ensure that you add this data manually, as we can only provide you with the information held within Mercury.
If you have not been with your current broker business for a full financial year, the data we provide will only cover the period of time which you were with Connective. If the information is not available from your previous employer or business, you can add a disclaimer to state that you have not been with your current broker business for the full reporting period.
Suggested wording: ‘I commenced with <insert company> on <insert date> and the information provided is from this date until the end of the financial year’).
Data requirement 1 - List of lenders available to the you via Connective and accreditations held
We will provide you with a table of Connective panel lenders for the previous financial year. Below is an illustrative example of what the table will look like.
Once you have generated the Credit Guide at the start of the roll out period, or the start of the new financial year, you will need to update your Credit Guide to reflect the lenders you were accredited with for the previous financial year.
How do you do that?
- In Mercury please go to the ‘Documents’ tab – click ‘Merge Template’ – then ‘Loans – Compliance’ – select applicable MASTER Credit Guide.
- Once the Credit Guide is generated, scroll down (last page) to the table titled ‘Connective lenders and accreditations held’.
- Double click on the tick box and the pop-up illustrated below will appear.
4. Select the highlighted ‘Checked’ option and then click ‘OK’.
5. Once you have saved the updated Credit Guide, you will need to upload this to Mercury. In the same section as point one, select ‘New template (upload)’ and save your updated Credit Guide.
Please note: As you have updated the MASTER Credit Guide, when Connective makes any changes to it you will need to update your version. Connective will update the MASTER Credit Guide at the end of every financial year, so please diarise this task for July 1. (We may also update it at other times, however, we will always send you a reminder whenever we update the MASTER Credit Guide).
If you have used lenders that are not on Connective’s panel, our suggestion is to insert the below table to capture this information.
Data Requirement 2 - Number of lenders you have settled loans with in the previous financial year
This is just the number of lenders you have used to settle loans in the previous financial year.
No action is required, except where you have used an off-panel lender. This data will be provided for you, please see the illustrative example below.
Table 3 - Top 6 lenders and % of loans settled for the previous financial year
This is your top 6 lenders and corresponding % of loans settled in the previous financial year.
No action is required, except where you have used an off-panel lender. This data is automatically populated in the applicable Credit Guide, please see the illustrative example provided below.
Combined Industry Forum - Disclosure requirements
The Combined Industry Forum (CIF) has made recommendations that brokers should disclose certain information to their clients. As a member of Connective, you are required to implement these recommendations. These disclosures refer to:
- Entertainment and Hospitality Register
- Tiered Servicing.
These disclosure requirements may not be relevant to you and your business. However, if they are you will need to ensure all applicable compliance documents are kept updated and made available to your customers on demand.
Disclosure 1 – Entertainment and Hospitality Register
All brokers are required to disclose in their Credit Guide that an entertainment and hospitality register is maintained (or held) and ensure a copy is available if requested by a client.
We have added this disclosure to the Credit Guide ‘Entertainment and hospitality register - We hold and maintain an entertainment and hospitality register. A copy can be provided on request.’ This has been added under the section ‘Other people we deal with’.
- An entertainment and hospitality register must be maintained for all Loan Writers. An example template is provided below.
- Records need to be retained for a minimum of 3 years.
- If you attend an event that has at least 80% educational content, then you do not need to record it in the register.
- All events, gifts or hospitality valued at $100 up to a maximum of $350 need to be recorded in the register.
- All Loan Writers attending an event or who are in receipt of a gift or hospitality will need to record the details in their register.
What do you need to do if a client requests a copy of the register?
A copy of the register for the preceding 12 months from the date of the client’s request is to be provided to the client in the manner requested. This can be by email or mail.
A copy of the register is to be provided as soon as possible after the request has been made.
Disclosure 2 – Tiered Servicing
A tiered servicing disclosure is ONLY required if you have a tiered servicing arrangement with a lender.
What is a tiered service arrangement?
Tiered service arrangements, also known as ‘broker clubs’, are arrangements you (a broker) has with a lender where you are receiving some form of non-monetary benefit not available to all brokers accredited with that particular lender. These typically are in the form of preferential services to assist your clients better including, but not limited to, faster response times to applications, direct access to assessors and / or access to upfront valuations. Although the industry is moving away from determining which brokers receive access to these tiered service arrangements solely based on volume of settlements to considering other quality metrics where volume is just one component, the CIF is of the view that access to such arrangements should be disclosed to your customers
Quality, not quantity.
Industry participants have removed arrangements where lenders reward brokers solely on the volume of business submitted, and now only offer tiered service arrangements based primarily on the quality of a broker’s loan submissions. With
this increased focus on quality and service, the customer becomes the chief beneficiary of a tiered service arrangement.
If you are not part of a tiered service arrangement, then no action is required.
If you are part of a tiered service arrangement with a lender, or more than one lender, you will need to take the following action:
1. Credit Guide disclosure update
Ensure a general disclosure is added to your Credit Guide. This disclosure always needs to be kept current by updating your list of lenders when a new tiered servicing arrangement commences or ceases.
The recommended placement of this disclosure is by the entertainment and hospitality register in the section ‘Other people we deal with’.
2. Preliminary Assessment
If you recommend one or more of the lenders you have a tiered servicing agreement with to your clients, it is also recommended that you include it in your Preliminary Assessment. Simply state that there is a tiered service arrangement in place with specified lenders and that this is outlined in the Credit Guide.
3. Credit Proposal Disclosure
A further disclosure is required on the Credit Proposal Disclosure if you have a tiered service arrangement with the lender selected by your client.
In this disclosure you would include more detail as to the specific agreement you have in place with this lender.
Tiered Disclosure Quick Reference Guide
Regarding the tiered service arrangement disclosure, the onus is on you to ensure that if you are part of such arrangements, they are fully disclosed in your Credit Guide and subsequent compliance documents where applicable.