Credit Policies for ACL holders
Some industry stakeholders have recently commented that all ACL holders, right down to sole traders, need their own “credit policy”.
At face value, QED Risk Services absolutely agrees with this statement. However this is about where our level of agreement stops. All policies need to be specific to the size and type of the business that they are for. Certainly, it would be inappropriate for a broker to adopt the “credit policy” of a Bank as their own.
Licensees must have a policy statement that expresses how they will address the responsible lending obligations. QED Risk Services provides its clients with comprehensive policies, tailored to that business.
However, for example, a broker’s responsible lending policy could be as simple as the following statement:
We have an obligation to ensure we go through the following process when assessing a consumer for credit:
- Make reasonable enquiries about the consumer’s requirements and objectives and about their financial situation;
- Take reasonable steps to verify their financial situation; and
- Based on the above two activities, ensure that any credit with which we assist the consumer is not unsuitable for them
Unsuitable simply means that the credit contract did not meet the consumer’s requirements and objectives or that the consumer could not reasonably be expected to meet the obligations of the credit contract without substantial hardship.
To help us meet this obligation, we have the following tools in place:
- A consistent and thorough fact find that helps us to ascertain (and demonstrate that we ascertained) the client’s needs and their financial situation;
- A list, which we review six-monthly, of the types of income verification that we will require from every client, regardless of what an individual lender will request;
- The recorded utilisation of a serviceability calculator, whether our own or the lender’s, that clearly shows the consumer’s financial position versus the credit contract obligations and, if necessary, accompanied by file notes that explain other facts pertinent to the client’s financials that may not have been included in the calculation itself;
- A checklist that appears on every file ensuring that all the above tools have been fully utilised in the assessment process.
These procedures and samples of our credit assessment activities are reviewed at least quarterly as a part of our compliance testing programme.
Such a document should contain samples or templates of the checklists and other documents mentioned above; and active, regular compliance testing on your business must, of course, be performed. QED Risk Services can provide all Credit Licensees with these tools and services. See here for further details.
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