A number of brokers have been asking about how technology fits into the National Credit Code and also how this relates to credit advice. So rather than leaving you guessing about how these aspects effect a broker, we thought we wouldshed some light on these issues now.
Under current legislation, an Australian Credit License is needed if credit advice is being given to others and the National Credit Code (NCC) applies. The NCC applies to credit contracts that have been entered into after July 1st 2010 where a lender provides credit and a charge is made for providing credit activities. Credit activities include credit contracts, credit services, consumer leases, mortgages, and guarantees. The National Consumer Credit Protection Act (NCCP) replaces any other state-based legislation ad is governed by the Australian Securities and Investment Commission (ASIC).
But, what this new legislation fails to do is to define and cover changes in technology and how a broker does business. Lets look at this in greater detail.
How a Broker Typically Does Business
A brokers service to obtain a loan for a customer typically involves a process.
This process is as follows:
1. A broker is sent a lead. This lead informs them that a customer wishes to borrow money. The broker then completes a personal and financial profile on the customer, based on the information that has been supplied.
2.The broker then searches the market for a lender that meets the customers profile. The broker creates a shortlist of lenders.
3.The broker then uses the customers objectives and features to narrow down the shortlist further.
4.The broker contacts the customer and informs them of their options, and they answer any questions that the customer has about the products. At this time the broker cannot offer any financial advice or answer any tax or legal questions, as they are not authorised to do so.
5.The customer then selects a lender and the broker assists the consumer to complete and submit a loan application. This must comply with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. The broker then deals with the lender until property settlement.
Now while this process seems long-winded and complex, the sophistication of brokerage software has made all of these steps electronic, and in some cases, these are even automatic. So the broker offers no real advice to the customer at all. Plus, if you review the NCCP you wont find any mention of credit advice in the document, which can be confusing.
In light of this, ASIC may need to reconsider what activities do and do not require a credit license. It may also be advisable that the watchdog revise its definitions and tasks so that they apply to the new technology that has now come into play. However, with technology being ever-changing this task may be harder than first anticipated, as it will not be easy to quantify these changes under the National Credit Code.
How Brokers Can Stay Abreast of Technology Changes
A brokers knowledge will need to be kept up-to-date, not only in respect to legislation and what they can and cannot do, but also in relation to technology and how they can best use this to enhance their business. Therefore, a broker may need to scrutinise lender selection and processing times, especially in relation to time sensitive transactions, post-settlement service standards and the structuring of loans.
Brokers may also need to offer additional value prior to file submission. This will then allow them to leverage lender relationships so that urgent files can be moved forward, and so that they can gain better pricing or submit requests that do not fall within policy guidelines.
For Brokers who seek a more comprehensive support network and ongoing training then eChoice, an award winning brokerage firm, can offer you a number of opportunities. These include, but are not limited to, free marketing services, intuitive online IT platforms, and lead generation programs, as well as compliance and risk education.
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Written by eChoice
Since 1998, eChoice has helped more than 50,000 Australians secure a home loan through its network of over 25 lenders and hundreds of loans. Best of all our service is cost and obligation free!