Ensuring that full disclosure and due-diligence are carried out; 3. If there are any questions about this material, please contact your area manager.

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1 ALPHERA Financial Services A Division of BMW Financial Services New Zealand Limited INTRODUCTION 1. This manual sets out rules which you must comply with as an agent of ALPHERA so that it can satisfy its obligations under the Credit Contracts and Consumer Finance Act These rules apply only to consumer credit contracts and relate to: Disclosure of standard lending rates and terms; Processing consumer loan and lease applications; Ensuring that full disclosure and due-diligence are carried out; How potentially vulnerable customers are dealt with. 3. If there are any questions about this material, please contact your area manager. REQUIREMENT FOR GENERAL DISCLOSURE OF STANDARD INTEREST RATES AND TERMS 4. ALPHERA must publish their standard interest rates and terms of lending on their website and make them available to customers upon request free of charge. 5. ALPHERA will supply signage advising customers that standard rates and terms of lending are available on the ALPHERA website and upon request from each dealership. You must: Ensure the signage is visible to all customers; and If the customer requests the information, print and provide them a copy of the standard rates and contracts from the ALPHERA website (available at 6. If the signage is lost or damaged or if you need more signage please call us as soon as possible. If you are unsure about what needs to be provided to the customer please contact your area manager. 1

2 GENERAL REQUIREMENTS 7. All information must be presented clearly and accurately, and in the least confusing way. 8. You must not give personal financial advice or advise people on their finances, or what financial arrangements might be best for them. Your role is to gather information, not to give financial advice or make decisions for people. 9. Any information or explanations given to a borrower, guarantor or lessee must be given by you. You must not rely on one borrower, guarantor or lessee passing on information or explanations to others. 10. All customers are allowed to seek further information and ask questions about finance products, and can take information away with them if they need more time to consider it. 11. If you are unsure about the answer to a customer s questions, please put them in touch with your area manager. INITIAL ASSESSMENT OF BORROWER S REQUIREMENTS AND OBJECTIVES Suitability of finance product 12. ALPHERA must be satisfied that the loan or lease will be likely to meet the borrower s requirements and objectives. 13. To meet that requirement you must consider before submitting an application whether ALPHERA is likely to be able to provide the kind of loan or lease that the customer needs: (e) (f) (g) Does the customer require a loan or a finance lease? (Note that a finance lease is usually suitable for businesses and not consumers). How much finance is required under each option? What timeframe it is the credit being sought for? Are there any particular credit features the customer requires (eg, a balloon payment at the end to reduce the payments during the course of the loan)? How important are those features to the customer (including in terms of cost)? Will any finance cover optional add-ons such as insurance premiums, extended warranties, repayment waivers or other costs - is the buyer aware of the added costs? Are the customer s requirements and objectives able to be met by ALPHERA s offerings? 2

3 Finance leases 14. Finance leases are usually not appropriate for a non-business customer, as they do not provide significant tax advantages outside of business, and do not result in ownership of the vehicle. 15. If the customer is interested in a finance lease you must explain the key differences between a finance lease and a loan arrangement, as set out below. Loan agreement Customer owns the vehicle For businesses and consumers Payments include principal and interest Payments are usually higher as they cover the full price of the vehicle plus interest and result in ownership Finance lease ALPHERA owns the vehicle and there are additional terms for this Usually for businesses Payments include principle and interest, and are based on the original amount financed less the residual value of the vehicle at the end of the lease term Payments are usually lower due to the Residual Value. The Residual Value is also the responsibility of the customer COMPLETING THE APPLICATION 16. If the customer wants to apply for a loan or a lease, all proposed borrowers, guarantors and lessees must complete an application for credit form. 17. You must: Provide each borrower, guarantor and lessee with an application form. Explain the key sections of the form. Tell them: (i) (ii) (iii) (iv) (v) (vi) The first part of the form covers their personal and contact details. The second part has a section on their finances. ALPHERA uses the form to assess what finance the borrower is eligible for. The information they provide must be accurate, correct and complete. ALPHERA may also require a credit check to be carried out. The structure of the finance (or lease) will be worked out separately. 3

4 (e) (f) Let the customer(s) know they can ask questions if they are unsure of anything. Have each customer sign the form. Make sure the forms are completed correctly and fully, before proceeding. Report any inconsistencies or irregularities to ALPHERA if for any reason you believe the answers provided on the forms are misleading or untrue. 18. The application form is the foundation for ALPHERA s assessment of each customer s finances, and must be complete in all respects. CUSTOMER DUE-DILIGENCE Information must be obtained from all borrowers, guarantors, and lessees 19. ALPHERA must make enquiries to satisfy themselves that all customers (borrowers, guarantors and lessees) will be able to make the required payments without suffering substantial hardship. 20. Borrowers, guarantors and lessees are all treated equally, receive the same level of disclosure, and be assessed by ALPHERA to the same degree in terms of their finances. 21. This means each person who will sign an ALPHERA agreement must be able to meet their commitments under the agreement as well as necessary expenses (accommodation, food, utilities, etc) and other financial commitments (such as repayment of other debts) without having to sell any of their assets. 22. ALPHERA does not expect you to assess peoples ability to pay, but: Before submitting an application you must ask questions of each customer about their finances so ALPHERA can assess whether there is a risk of hardship; If for any reason you suspect the information provided by a customer is misleading or untrue, you must report this to ALPHERA when submitting the application; ALPHERA may ask you to obtain and provide other information to assess the application. Income 23. Enquiries must be made about the stability of the customer s current income and whether there are likely to be any changes that may affect it. For example: (e) How long has the customer been in their current job? How long do they intend to stay in their current job? Are they paid a wage or salary? Do they expect their income might change over the term of the loan? Is there anything else that the customer knows of which might affect their income? 4

5 24. If you believe the information provided is incorrect you must obtain supporting documents and advise ALPHERA of your concern when submitting the application. Expenses 25. Enquiries must be made into the stability of the customer s current expenditure and whether there are likely to be any changes that may affect it. For example: Are there any large one-off payments coming up (eg, holidays)? Is there anything else that the customer knows of which might affect their expenses? If there are any debt repayments (other than for ALPHERA loans): (i) (ii) (iii) (iv) What are the debt repayments for? How long will the customer be making these payments for? Is any interest at a fixed-rate or can the rate change? Will there be any lump-sum repayments during the loan (or lease) term? 26. If you believe the information provided is incorrect you must obtain supporting documents and advise ALPHERA of your concern when submitting the application. Assets and liabilities 27. Reasonable enquiries must be made into the customer s assets and liabilities to ensure the information provided is correct. For example: Are the assets listed here all owned in the customer s own name? If not, who owns the assets (is it a partnership, company or a trust)? Is there anything else that the customer knows of which might affect their assets or liabilities? 28. If you believe the information provided is incorrect you must obtain supporting documents and advise ALPHERA of your concern when submitting the application. Balloon payments 29. Where an agreement involves a balloon payment at or near the end of the term of the loan the customer must indicate how they will make this payment. 30. ALPHERA will typically require confirmation of: Sufficient cash assets that will be used to make the payment; A sufficient surplus of income over expenses that will be used to make the payment; or Other financial information to satisfy ALPHERA that refinancing could occur. 5

6 31. If it is not clear from the application how the customer will make a balloon payment, ALPHERA may require you to obtain further information from the customer. Vehicle insurance 32. ALPHERA must make enquiries to satisfy itself that any vehicle insurance policy financed by ALPHERA will meet the borrower s requirements and objectives and that any payments for insurance can be made without the customer suffering substantial hardship. 33. You must: Tell the customer that they have the option of choosing ALPHERA-provided insurance, or using an alternative provider of full motor vehicle insurance; Confirm that the insurance policy they choose will provide full motor vehicle insurance for the full value of the vehicle; and Provide ALPHERA with details of the premium and excess details so that it can factor these into its calculations and confirmation of the matter in above. PRE-CONTRACT DISCLOSURE FOR ALL BORROWERS, GUARANTORS AND LESSEES 34. ALPHERA is required to assist borrowers, guarantors and lessees to make informed choices and understand the full implications of entering a finance agreement. 35. Every borrower, guarantor and lessee must sign a disclosure statement before any of the loan or lease documentation is signed. 36. You must explain each point in the disclosure statement to each customer and tick off each paragraph as you do so. 37. Every person who is a borrower, guarantor or lessee must then sign the disclosure statement, which must then be sent to ALPHERA. PRE-CONTRACT DISCLOSURE FOR CO-BORROWERS 38. ALPHERA is required to assist co-borrowers and co-lessees to make informed choices and understand the full implications of acting as a co-borrower or co-lessee. 39. When more than one person is listed as borrower (or lessee) but it appears that only one benefits from the loan (or lease), you must tell them: That they will be liable for the full amount of the liabilities under the agreement and other costs and must make regular payments with other co-borrowers (or co-lessees). That they should seek independent legal advice before acting as co-borrower or colessee, and that you will provide them time to do so. 6

7 PRE-CONTRACT DISCLOSURE FOR GUARANTORS Compulsory information to guarantors: limiting liability 40. Before an application is made, you must tell any guarantors that they can ask that their liability under the guarantee is limited, but that is not something that ALPHERA will always agree to. 41. Whether ALPHERA will limit a guarantor s liability depends on a number of factors including: The amount of credit; How many borrowers, guarantors or lessees there are; Their creditworthiness and ability to pay; The level of security under the agreement. 42. If a guarantor wants to limit their liability, indicate this to us when submitting the application. ALPHERA will assess the request when processing the application. Compulsory information to guarantors: financial obligations 43. ALPHERA is required to assist guarantors to make informed choices and understand the full implications of giving a guarantee. 44. You must explain the key features of a guarantee to any guarantor before they sign the loan documentation. You must tell each guarantor: That by giving a guarantee, they will become liable as well as, or instead of, the borrower. That they will be liable for the full amount of the borrower s liabilities under the agreement and other costs in the event of default. That they must rely on the borrower to inform them of any repayment difficulties with the loan. ALPHERA will not send statements to them. They can enquire about the status of the loan at any time by calling That they should seek independent legal advice before giving a guarantee, and that you will provide them time to do so. CUSTOMERS IN A VULNERABLE POSITION 45. An increased level of inquiry and explanation is required at all stages when dealing with borrowers, guarantors and lessees who are in a vulnerable position. 46. You do not need to ask any routine questions to identify vulnerable customers, but you must tell us if there is any indication that a customer may not be able to protect their own interests (for example due to their age, physical or mental condition, or due to significant pressure or influence being placed on them by another person to enter into the transaction), or if they do not appear to understand the key features of the finance contract when explained to them. 7

8 47. Some examples of where customers are vulnerable include: Customers who appear to not have a good understanding of English, or basic knowledge of financial matters, or you suspect they have not understood for any other reason. People who appear to be under significant pressure or influence from another party to enter the finance agreement or give a guarantee. 48. If you identify a customer as being potentially vulnerable: Indicate this on the application form. Recommend that the customer obtain independent legal advice. Where practicable the recommendation must be made without other customers present. 49. If you need assistance please contact your area manager. CUSTOMERS WHO DO NOT HAVE A GOOD UNDERSTANDING OF ENGLISH 50. Where you suspect a customer does not have a good understanding of English, you must: Have another staff member who is fluent in their language explain the finance agreement or lease or guarantee to the customer; or Use another person to translate any information provided. The interpreter must be over 18 years old and not have a conflict of interest (eg, a borrower cannot explain the information to a guarantor or co-borrower); or Recommend that the customer take away a copy of the information provided and seek legal advice. 51. If you have taken any of the above steps, indicate this to us on the application form. 52. If you are unsure whether these steps are required, please contact your area manager. ENQUIRIES AFTER FINANCE AGREEMENT EXECUTED 53. If any customer returns to you to with questions about their concluded finance or lease agreement, please tell them to call us on