What are the design and distribution obligations (DDO)?
The design and distribution obligations require lenders to design financial products to meet the needs of consumers and ensure that the distribution of their products is completed in a more targeted manner.
From the 5th October 2021 lenders need to make available a Target Market Determination (TMD) for each of their products.
A TMD describes the type of consumer the product has been designed for. It sets out the likely objectives, needs, and the financial position of a customer that would fall within that target market for that product.
How does this impact you as a broker?
There are a couple of things you need to be aware of.
- Ensure you know where to access the lenders target market determination documents. Lenders are still finalising these currently, however it is expected that links will be made available either through Mercury or the lenders broker portal as well as making these available generally on their website. Further information will be supplied when known.
- Make sure your customer falls within the target market determination for the lender’s particular product you have recommended.
- Notify Connective of any customer complaints relating to lenders products.
Ensure your customer falls within the TMD for that lender’s product.
Brokers have an obligation to take reasonable steps to ensure that the distribution of the product is consistent with the lenders TMD.
This originally applied to all brokers, however due to mortgage brokers having to meet a Best Interest Duty, the products they recommend will be in the client’s best interest.
Asset finance brokers who are not subject to a Best Interests Duty will need to ensure they adhere to DDO legislation by only recommending products to customers where the customer meets the determination guidelines.
You should not be recommending a product if there is no TMD available and although there is no requirement to provide the TMD to the client, you must do so upon their request.
TMDs will be available on the lenders broker portals and/or websites.
Notify Connective if you receive any complaint relating to a Lenders product.
This part of the DDO legislation applies to all brokers, both mortgage and asset finance brokers, regardless of whether you operate as a Connective Credit Representative or hold your own license
If you receive a customer complaint relating to a product then this must be reported to Connective.
Notifying Connective of a complaint
All complaint notifications must be sent here.
Summary - Credit Representatives of Connective
If you are not subject to the Best Interests Duty you will need to ensure that when recommending products that each customer falls within the TMD for that lender.
Summary - Australian Credit Licence holders
You must notify Connective of any customer complaints relating to a lender product. This is a new requirement so you will need update your policies and procedures to reflect this.
For more information relating to the DDO legislation you can read the ASIC Regulatory Guidance here.