Many credit industry pundits had scoffed at the phraseology adopted by the law-makers with respect to credit.  Whilst the term “not unsuitable” seems unwieldy at first, it turns out to be something of an arrow in the broker’s quiver.

Six months ago, many of QED Risk Services’ credit industry clients were in a panic about the thought of having to provide reams of options to clients and what to do about those difficult clients that just wanted to be set up with the lender of their choosing etc.

However, as we dig deeper into the world of responsible lending, we find that the only test a broker has to meet is that they did not assist a client with a product that was unsuitable for them.

The client can tell you what to do if they want.  No need for complicated “execution only” forms a-la financial planning world.  No, all you need to do is demonstrate that the product you assisted the client with was not unsuitable for them.

Not unsuitable?

On the surface, this is fairly simple and QED Risk Services are finding, in our journey of assisting credit businesses with Australian Credit Licensing, that most brokers are already complying with the spirit of the requirements.

To arrive at a conclusion of “not unsuitable”, brokers need to do three things:

1. make reasonable enquiries about the client’s financial situation, their requirements and their objectives;
2. make reasonable efforts to verify their financial situation; and
3. based on 1. and 2. come to a conclusion on unsuitability.

Not a mammoth task and not totally misaligned with what most brokers do now. However, there is a little sting in the tail.

Preliminary assessment

If a client asks for it, brokers are obliged to provide them with a written assessment of how they arrived at the conclusion that the product was not unsuitable for them.  This is known as a preliminary assessment.  It’s simply a matter of documenting the three-stage process outlined above.

But what QED Risk Services is experiencing is that many brokers think that completion of the lenders’ serviceability calculator will be sufficient to demonstrate the requirements.

In our experience, in most cases this will not be sufficient to meet the broker’s obligations.

QED Risk Services has been giving credit industry clients assistance in developing client-friendly preliminary assessment reports that DO demonstrate the validity of the broker’s assessment in deciding to assist a client with a particular product.

Please see our Services page for more information, consider purchasing our Australian Credit Licensing Application Kit, or contact us directly to discuss the ways in which QED Risk Services can assist you to gain your ACL.

We are very pleased to report that we are now assisting a growing number of credit businesses of all sizes to gain their Australian Credit Licence (ACL) in 2010.

We have been somewhat surprised that the majority of clients are opting, straight out, to allow us to provide our complete licensing service, thereby taking all the uncertainty and headaches out of the process.

Nonetheless, this is not to say there has not been strong uptake on the QED Risk Services Australian Credit Licensing Application Kit.

However, either way, our clients are all reporting to be very pleased with the most important part of our services – education!  Our Kit has the great advantage of killing two birds with the one stone – informing the business owner of their obligations and options, at the same time as actually completing the basic requirements.

Clients taking our full service are even better informed.  Our targeted fact-find on a client’s business is not a mere check-list of things to do.  Far from it.  There are many ways in which to write policy documents, especially complicated items like risk management programmes.  QED Risk Services ensures that their clients are provided with completely tailor-made solutions that are all about their business and not about just trying to sell the client something they can’t practically use.

But the service doesn’t end with a Licence.  The pathway as a Licensed financial entity in Australia is a long and winding one and we are pleased that our clients are almost invariably choosing to retain QED Risk Services’ services post-licensing as their key, strategic partner to help them work through licensing matters.

But we also recognise that the majority of the industry, right now anyway, is concentrating on the task at hand.  We’re glad we are here to provide assistance.

In QED Risk Services’ travels around Credit Licensing, we keep being amazed by the talk we hear around how the industry is “waiting for the dust to settle” or “how the regulations will end up looking” or, even, talk of the “proposed legislation”!

The National Consumer Credit Protection Act got its sign-off from the Governor General on 15 December.  The legislation is here.  ASIC released the bulk of their regulatory guides on 23 December.  Those Guides do not change easily.

The national credit regime is here.  It is final.  Procrastinate and you will miss out.

On the other side of the coin, QED Risk Services was pleased to note that more than 2,500 entities registered with ASIC within the first three days of credit registration in April.  We hope that’s a good sign that the industry will be quick to adopt the changes.

There are many procedures you will need to adopt that are probably new to you in the credit industry.  You can start adopting those procedures now and manipulate them to add value to your business.  That way, come 1 July, you will be ready to submit your application to ASIC and miss the log-jam that will inevitably come at the end of the year.

Remember to contact QED Risk Services for any queries you may have.  We work on a “first consultation free” model so will be pleased to talk to you without any obligation on your part.

Call us now on 1300 817 662

In defiance of the harbingers of doom, the Australian Securities and Investments Commission successfully started taking registrations for the new federal credit regime on 1 April.  Many hundreds of industry participants have already registered and, at this point, QED Risk Services has not heard any stories of ASIC server meltdowns or any other mishaps.

Having such a milestone event tied to a date, just before a 4-day holiday weekend was viewed by many as a bold move.  ASIC seem to have backed themselves well.

Of course, registration is only the first step.  Registrants need to now decide whether they will be applying for their full Australian Credit Licence and putting preparations in place to comply with Licensee requirements prior to making their application between 1 July and 31 December.

QED Risk Services hopes that the volume of early registrations is a good sign that the industry is not going to leave licensing and the preparatory work until the last minute.

See our credit licensing page for more information about how we can assist you with all your ACL needs.

A question that our consultants have been asked a lot recently is “why would we pay for QED’s upcoming Australian Credit Licensing Application Kit when there are others offering the same thing for free?”

The answer is, of course, that you need to compare like with like and that nothing of true value ever comes for free.

The all-in-one-user-guides we are seeing so far are clearly written by law firms that typically sit on the fence and give you ALL the applicable advice, but never actually make a call and give you the direction you need.

And that’s fine – that’s our experience of law firms.  QED Risk Services would never conduct certain activities without consulting legal counsel.

But the “guides” we have seen so far for prospective credit licensees fall way short of the mark in terms of EMPOWERMENT for individuals and businesses trying to navigate the credit licensing minefield.

This week (beginning 1 March 2010), QED Risk Services will publish a preview example of the type of material that will be made available in our Australian Credit Licensing Application Kit.  From this, you will clearly see the value and education that will be a part of our full Kit.

For those that really don’t have the time to spare in their credit business navigating documents, QED Risk Services will be available to offer a range of other assistance services to not only embed the required systems in your credit business, but to take advantage of this opportunity and turn these regulatory imposts into value-adds for your business.

Remember, the assistance that QED Risk Services provides is tailored to your business.  We give you everything you need, nothing that you don’t and we generally charge an agreed, competitive, fixed fee.

Keep your eye on QED Risk Services’ news page, or contact us directly for more information about the assistance we can give your credit business, starting today!

As promised, QED Risk Services will have their Australian Credit Licensing Application Kit ready for sale on March 15.

As well as templates for all the required policies and procedures that Licensees are required to have, the Kit contains comprehensive walkthrough guides and checklists to ensure that the user has complete “look and feel” understanding of the ASIC Licensing process when it hits on 1 July.

The Kit will sell for $1,000 which represents a massive saving over some of the “free” manuals being offered as the QED Risk Services Kit contains a wealth of “how-to” information not available elsewhere.  We estimate the time savings available through the use of our Kit over the “free” offerings is worth around $8,000 to the average mortgage broker.

Of course, in addition to the Kit offering, QED Risk Services will be pleased to provide an all-encompassing, fixed price service to prospectiveCredit Licensees to cover all Licence requirements for them.

Businesses that purchase the Kit will have the price of the Kit deducted from their consulting fees if they subsequently choose to use QED Risk Services to apply for their full Credit Licence.

Please see our Contact Us page if you have further questions.

To meet their earlier promises, ASIC released its latest tranche of Regulatory Guides immediately prior to the Christmas break.  Although QED Risk Services’ discussions with ASIC suggest that not all elements are yet set in stone, these documents provide the best indication thus far of how the online application process will work and ASIC’s expectations of the detail and background systems required by prospective Licence applicants.

The new Guides that have been produced are:

Regulatory Guide 204:  Applying for and varying a credit licence
Regulatory Guide 205:  Credit licensing:  General conduct obligations
Regulatory Guide 206:  Credit licensing:  Competence and training
Regulatory Guide 207:  Credit licensing:  Financial requirements
Regulatory Guide 208:  How ASIC charges fees for credit relief applications

ASIC has also produced a somewhat helpful Information Sheet to assist small prospective applicants in understanding the requirements – INFO 97 Guidance for small credit businesses.

But is this getting you closer to your Licence?

Most credit brokers had a hectic close to 2009 and many have taken a couple of weeks since Christmas to cool their heels a little.  Now 2010 is hotting up – do you have the time to trawl through ASIC Regulatory Guides to find out about the registration and Licence application processes?  1 April and 1 July will be on us before we know it.

Some law firms have recently published their own interpretations of the ASIC Guides.  These don’t necessarily make it easier for credit providers to know where they currently stand.

For simple, easy-to-understand (not in lawyer-speak) assistance that will save you time, contact QED Risk Services about our range of services that can give you exactly what you need to get licensed.

Similar to the Australian Financial Services Licence regime, the upcoming Australian Credit Licence legislation also allows options to prospective credit providers as to how they operate.

Chapter 2 of the National Consumer Credit Protection Bill 2009 requires that, in order to engage in credit activities, a person is either:

• a credit licensee;
• an employee or director of a licensee; or
• a credit representative of a licensee.

One thing that this effectively means is that aggregators and other similar groups will need to decide, strategically and very soon, which path they will choose to go down – to authorise individual broker businesses in the aggregator network as credit representatives of the aggregator’s licence; or to require each broker to obtain their own licence.

Each path has its pros and cons but, contrary to what some commentators have suggested, each has nearly an equal amount of work involved.

For example, to get an individual licence, the applicant will need to satisfy ASIC of its ability to cover off on a number of requirements.  But if the applicant (eg an aggregator) is authorising others as credit representatives of its licence, then the applicant will need to take steps to ensure that those same requirements are being followed through in the credit representative’s business.

In either case, a sufficient audit trail, compliance programme and risk management programme will be required, all the way down to grass-roots level within the individual brokers.  Whether this is done by aggregator groups in the process of applying for their licence and authorising their credit reps; or done by individual brokers in applying for their own licences, the work and costs involved will be similar.

For this reason, industry participants will need to carefully consider the other pros and cons in making their choice and should not choose based on what they think will be “easier”.

See our Australian Credit Licensing page for more details.

This week, the Australian Securities and Investments Commission released its Information Sheet 96 on Getting Ready for Credit and it actually contains some very sound advice.

Apart from providing an abridged timeline for the transition to the national credit regime, the information sheet advises potential credit licensees to start acting now, doing what they can to avoid any last minute complications in the registration and licensing rush that will ensue on 1 April 2010.

ASIC’s recommends providers do the following as a minimum:

1. Become a member of an External Disputes Resolution Scheme, for example COSL
2. Perform background checks on your key people
3. Check and, where necessary, update your details on various ASIC registers to make sure they are correct and are in the same name etc in which you will be applying for your Licence

In addition to this, QED Risk Services thoroughly recommends businesses consider their current policies and systems as there are some elements that we know are going to be part of the requirements.  See our Australian Credit Licensing page for more details about this.

See the full Information Sheet 96 at ASIC’s website.

Last estimated for release in “mid-December”, the long-awaited update to the risk management standard was released on 20 November 2009.

The original Australian Standard 4360 of 1999 was a revolutionary document, which was the first and only of its kind.  The risk manager’s bible was adopted by many countries as a quasi-international standard in the absence of anything from the International Standards Organisation (ISO).

Now AS/NZS4360:2004 has been superseded by AS/ISO 31000.  Regular users of the former standard will recognise a lot of familiar material in the new ISO standard.

Although Australian regulators have not yet released any formal statement, given that 4360 is no longer, any prior regulatory reference to the old standard should now be read to mean ISO 31000.  All businesses that are required to have compliance risk management systems in place will need to consider the new standard when reviewing their systems.

In particular, new ASIC licensees (AFSL and ACL) will need to ensure their risk management arrangements comply with the new standard.  QED Risk Services can assist companies and particularly Licensees in upgrading their current risk management systems or building new systems from scratch.