Consumer finance is an area of the financial services sector which is highly regulated, with legislation in place to safeguard borrowers and to establish the obligations and regulations that lenders must comply with.
This article is intended to educate our customers in this area and provide them with the information that they are entitled to and to ensure they are well-informed when dealing with Jade Finance and making decisions about car loans, motor bike loans, caravan and boat loans.
At Jade Finance an integral component of our service is to not only source the cheapest loans for our customers but also to ensure that the loan process is hassle-free and streamlined. But some of our customers are sure to consider that the process involves a lot of paperwork and questions. The first thing you need to know is that many of the processes we undertake in handling your loan are required by law. So our consultants are not only being diligent and thorough to safeguard your interest but they are complying with the law.
Jade Finance is a licensed finance broker, known in the official regulations and documents as a credit licensee, and as such must comply with the relevant section of the National Consumer Credit Protection Act 2009. This includes the responsible lending conduct and obligations required by lenders. The Act is regulated and enforced by ASIC - the Australian Securities and Investment Commission, which imposes significant penalties on lenders that do not comply.
By being aware of the lender regulations around consumer lending, you will hopefully have a greater understanding of your own rights as well as knowing more about what to expect from your Jade Finance consultant when handling your loan.
We cover a range of aspects in this article and if you require further information or clarification, you are welcome to contact us.
The Role of ASIC
ASIC is often referred to as the ‘official regulator’ which means it is the independent body of the Australian Government, charged with regulating the financial services sector, consumer credit, the financial markets and corporate activities. As such it is ASIC who has responsibility for administering the National Consumer Credit Protection Act. Part of this responsibility includes setting guidelines and obligations that credit licensees such as Jade Finance, other finance brokers, finance companies and banks must comply with when providing consumer loans to individuals.
Responsible Lender Guidelines
Credit licensees are organisations that offer lending services to individuals, ie consumer finance, and each such business must be licenced by ASIC. Credit licensees include banks, finance brokers and finance companies. Jade Finance credit licence number is ACL 484387, for your reference. Licensees must display their ACL on documents, advertising material and in other places.
To regulate this sector of the finance industry in the interests of providing safeguards for consumers, ASIC has set up stringent guidelines for credit licensees to follow. Failure to comply attracts a penalty.
The responsible lending conduct obligations form an important part of the guidelines, as legislated in the Act. The obligations include the responsibility of each licensee to establish operational processes and protocols to ensure that they meet their obligations under the law.
A key statement including in the obligations states that a credit licenses must not enter into a credit contract, or suggest a credit contract, or assist an individual to apply for a credit contract, if that credit contract is assessed as unsuitable for that person.
This comes down to the simple obligation that as a responsible lender, Jade Finance cannot offer you a loan to purchase a car, boat, caravan, motor bike or for any other purpose, if that loan is unsuitable for you.
That takes the explanation to how the credit licensees establish process to ensure that they meet the obligations under the law. Jade Finance has established and clearly sets out, the stringent practices and steps that our consultants must follow to ensure that the loan offer or quote that we present to you is suitable for you.
Obligations of Lenders
The obligations that ASIC has set out for all credit licensees in regard to consumer loan services and especially the application process include:-
- Credit licensees must establish, implement and comply with a set of practices and procedures for the purpose of verifying and checking a person’s financial situation and to assess that a specific personal consumer loan is suitable for that customer.
- Credit licenses have the obligation to disclose specific information and documents to customers. This information is to ensure that the customer understands the services provided by Jade Finance and understands the detail included in the specific credit loan contract that is offered.
Knowing what our obligations as responsible lenders entail, should assist you develop a greater understanding of the consumer loan application process and a greater appreciation of the extent of the work that our consultants undertake to ensure the loan offers is suited to your individual requirements.
Jade Finance Responsible Lending Processes
Jade Finance has established and implements a specific Responsible Lending Flow Sheet that all our consultants must follow, which ensures we meet our obligations as a responsible consumer finance lender. The Flow Sheet details each step that a consultant goes through when discussing a consumer loan with a customer.
It is as follows:-
- A Credit Guide must be provided to each customer with whom a consultant has engaged in a discussion around consumer finance. The consultant retains a record of when that credit guide was provided as our confirmation that that step has been completed
- If a DOF is propose, the credit quote must be signed. The signed credit quote is included as part of the loan application submission.
- The consultant must ensure that the customer is provided with and explained to, the necessary privacy statements. The customer must sign the statements as confirmation that they were advised of mattes involved with the sharing of their information for the purpose of the loan application.
- Detailed Credit Checks are completed. This involves checking credit history and credit scores, verifying the history of the customer’s addresses and any history of directorships.
- A Check of Financial Capacity is undertaken which involves the verification of information about a customer’s financial situation which has been provided.
- Living expenses are checked verbally with customers. This allows the consultant to confirm that every expenses has been advised. Once this check is completed, the consultant sends a copy of the information to the person as confirmation that the discussion was undertaken and to confirm the expenses that were discussed.
- A Pre Lim is completed. This document is a confirmation that the consultant is engaged in a review of the customer’s requirements.
- The next step is to send a Credit Proposal to the customer. This includes details of how that consultant is proceeding with the customer’s enquiry or application, the loan amount in total, repayment schedule that is proposed and other details.
- Some consumer loans allow for an optional balloon. If such a balloon is requested by the customer, the consultant questions the customer on their intentions as to how they will finalise this payment when it is due.
- Complete and thorough notes are retained by the consultant throughout this entire process. These notes cover every interaction with the customer with the date it occurred and a timeline of each stage.
This Flow Sheet is in place to ensure that Jade Finance complies with its obligations and that our consultants are addressing the best interests of the customer.
Obligations of Disclosure
As mentioned above, part of the responsible lending obligations is to provide customers, even those just making an enquiry, with the required information as determined by ASIC in the Responsible Lending Disclosure Obligations.
The documents include the information that customers should require to understand the credit activities as provided by Jade Finance. The information is also intended to advise customers of their consumer rights, to understand and contract and offers and in general, assist the customers to make their own decisions.
The information and documentation that Jade Finance is required to provide to customers includes:-
- Credit Guide – information on consumer credit of a general and preliminary nature.
- Quote of Services – this must cover the fees and the costs of the services that a credit licensee intends to bill to the customer. The quote must be accepted by the customer’s signature and dated.
- Proposal Document – including details of the cost of services provided by the credit licensee with the inclusion of any commission which may be being received by that credit licensee.
- Written Assessment - this document will state that a particular credit contract, ie loan offer, has been assessed as not suitable for a customer.
The Jade Finance Commitment
Jade Finance accepts and undertakes it role as a licensed finance broker, ie a credit licensee, with the utmost professionalism and a commitment to abiding by the regulations for responsible lenders as required under the law and determined by ASIC.
In addition, we go beyond what is required to what we consider to be ethical conduct and actions and engage in practices which are always in the best interests of customers.
If you are engaging with other lenders – banks, brokers, finance companies – you can utilise this information that we have provided to do your own checks on these lenders to ensure they are compliant with the Responsible Lending Guidelines.
If you have any questions around any aspects of consumer finance, please contact Jade Finance and one of our consultants will assist you. Call 1300 000 008