Understand Compliance for Consumer Asset Finance and Personal Loans

Transcription

1 Understand Compliance for Consumer Asset Finance and Personal Loans

2 Objectives for today: Understand the compliance requirements for adhering to your NCCP responsible lending obligations. Review the systems, tools and resources required to meet your compliance obligations. Highlight key processes and procedures to assist in meeting your compliance obligations. How to access more information when you need it.

3 What is credit assistance? You have provided credit assistance when you: Suggest a credit contract for a client Assist the client to apply for a credit contract Suggest the client remain in or increase the limit of an existing contract

4 What are the obligations under NCCP for personal loans and consumer finance deals? Under NCCP, your Responsible Lending obligations apply to any contract that is for personal, household or domestic purposes. To remain compliant, you must undertake the following three key steps: Make reasonable inquiries into your customer s financial situation, requirements and objectives. Credit Quote Take reasonable steps to verify the customer s financial situation, and Make a preliminary assessment about whether the credit contract is not unsuitable for the customer. Preliminary Assessment The level and type of enquiries you make for each customer will vary depending upon their circumstances. You may need to make further inquiries to ensure that the product is not unsuitable.

5 Are the obligations different for arranging a consumer asset finance or personal loan rather than a home loan? As mentioned above, your responsible lending obligations apply to any contract that is for personal, household or domestic purposes - and that includes leases as well as loans. Your compliance obligations when providing credit assistance for consumer leases is defined in Section 8 of the National Consumer Credit Protection Act 2009 (NCCP). It states that: A person is providing 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 to 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.

6 How to determine if the contract is not unsuitable for the client? Not unsuitable means that the credit contract cannot pass the three-step process: Make reasonable enquiries about the customer s financial situation and their requirements and objectives demonstrates that the loan is not unsuitable for the client s needs; Verification of the client s financial situation shows that the client would be unable to service the home loan without this causing substantial hardship; and A preliminary assessment is undertaken based on the information gathered in the first two steps.

7 What are reasonable inquiries? Credit Guide Reasonable inquiries about a consumer s financial situation include: 1. the consumer s current amount and source of income 2. the extent of the consumer s fixed expenses 3. the consumer s variable living expenses Credit Quote 4. the consumer s credit history including existing debts 5. the consumer s repayment history on any existing debts 6. any significant changes to the consumer s financial circumstances that are reasonably foreseeable Preliminary Assessment 7. geographical factors, such as remoteness, which may require consideration of specific issues; and 8. Indirect income sources (such as income from a spouse) where that income is reasonably available to the consumer

8 Best practice to identify and verify the client s declared monthly living expenses Both ASIC and APRA have reinforced the need for finance brokers to obtain a reasonable assessment of a clients living expenses. The 4 steps to achieve best practice: 1. Ask the client 2. Undertake an independent check 3. Confirm with the client 4. Document and communicate your assessment Living expense categories have are standardised within the Needs Analysis - refer Questionnaire section of Mercury.

9 Verification of Information Verify your client s financial position: Review the documents you have collected Credit Quote Undertake searches and make calls Ask for additional documents if required Preliminary Assessment DON T TRUST - VERIFY

10 Conducting non-face-to-face client interviews 1. Conduct a video conference (Skype, Zoom, Go To Meeting are some common and secure service providers) Credit Guide 2. Let the client know that you are going to record the meeting. If the client says no, I d be raising a red flag as to why. If a consumer is serious about getting credit and a genuine borrower, they won t mind. 3. Have a certified copy of the identification provided to you. This will need to be provided to you prior to the interview being conducted. Ask the customer to hold their ID next to them and cross check this to the original copy that has been provided to you 4. Credit Obtain Quote certified copies of the client s bank account statements. (Connective credit representative must obtain latest three (3) months of transactional statements for all clients - to review salary/income crediting; identify any undisclosed credit commitments and assist with enquire and steps to verify the clients monthly living expenses. 5. Preliminary Seek lender approval via your BDM (as not all lenders allow a non- face to face meeting) Assessment 6. If in doubt about anything, speak to us. We are here to support you.

11 NCCP compliance documents and Mercury wizard Therefore if you have a client wishing to purchase a vehicle for personal use, then NCCP obligations apply whether you help them arrange a lease or a loan. All compliance documents must all be completed for every consumer Asset Finance application, regardless of whether it is a lease or a loan. These include: Credit Guide Credit Quote (but only if you are charging a fee for your services outside the credit contract) Needs Analysis Preliminary Assessment Credit Proposal Disclosure Checklist and Declaration Also remember to keep detailed File Notes about the provision of the above together with recording a note for every client; lender and third party interaction that s relevant to the client-loan transaction process.

12 NCCP compliance documents and Mercury wizard These requirements are mandatory for Connective Credit Representatives and are our best practice recommendation for ACL Holders and their staff. Important Note: Mercury does not currently hold any product information, interest rates, fees and charges or servicing calculators from our Asset Finance or Personal Loan providers. Asset Finance: the Preliminary Assessment and Credit Proposal Disclosure documents are auto-populated from the information entered within Details section of the Opportunity. Personal Loans: the Preliminary Assessment and Credit Proposal Disclosure documents are manually completed to match the loan facility being recommended/offered by the specific lender. The sections highlighted in red (missing fields) on the documents must be completed. Use the Compliance checklist to make it easy. The checklist attached to today s presentation will provide what action is required and when each compliance document should be completed.

13 What is best-practice compliance for personal loan and consumer finance supporting documentation? For each Asset Finance lease or loan, the following supporting documentation should be completed and held on file. Again, these requirements are mandatory for Connective Credit Representatives and are our best practice recommendation for ACL Holders. Collecting this supporting documentation for your Asset Finance deals provides evidence that you have demonstrated adherence to your responsible lending obligations: Identification documents - photo ID and additional Income verification documents: PAYG: The most recent, 2 consecutively dated payslips and one of the following: PAYG summary, ATO notice of assessment, or full tax return. Self Employed: Two years personal tax returns and correlating ATO notice of assessment, two years tax returns for all entities (company, trust, SMSF), and two years profit and loss statements (if applicable). Three months of transactional account statements - confirmation of salary/income deposited, evidence of additional income, regular deductions and other credit commitments, and assist to identify the client s monthly living expenses. Lender and other supporting documents (such as Rates Notice, Refinance loan statements, etc.) Contract of Sale - Vehicle (or other if writing a loan for a different kind of asset).

14 Mercury system - removal of Tax File Numbers You must take reasonable steps to securely destroy or de-identify tax file number information. Within the Attachments section of the Opportunity or Person, upload the financial statements (in pdf); then highlight document; then click TFN Redaction for the process of removal each tax file number commences.

15 Remember to sight the original documents! Original documents should always be sighted and copied for any kind of lease or loan. (Photocopies are not acceptable.) If you are unable to sight the original documents in person, then legally certified copies of identification documents are required prior to providing credit assistance. Document copies must be good quality and legible and include: 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 Identification must also be collected in adherence with Lender specific requirements. We have provided a generic paper based Fact Find - Needs Analysis document to help you capture information about your client s personal and financial situation and analyse their needs and objectives for borrowing. This document can be located in Documents > Merge Templates > Asset Finance-Compliance folder.

16 Mercury - Asset Finance Opportunity

17 Mercury - Asset Finance Opportunity

18 BOLT - Nodifi system

19 BOLT - Nodifi system

20 Mercury - Personal Loan Opportunity

21 Mercury - Personal Loan Opportunity

22 Mercury - Personal Loan Opportunity

23 Staying compliant in 5 simple steps 1. Complete your NCCP compliance documents on all consumer applications 2. Make reasonable enquiries into the consumer s financial situation 3. Verify the information the customer has provided to you 4. Retain documentation and make notes 5. Use Mercury to its full potential

24 Contact the Compliance Support Team with any questions! Remember your compliance requirements are virtually the same for your Asset Finance deals as they are when you are writing residential Home Loans, so these procedures should be easy to follow. But if you have any compliance related questions at all, please contact the Compliance Support Team and we ll be happy to assist and provide guidance. Just click the help icon in Mercury or us directly at: Questions? Please ask

25 Thank you for your attendance Webinar: Tuesday 23 rd October 2018 Understand Compliance for Consumer Asset Finance and Personal Loans