What is required for Credit Disclosure Documents - Simplified!
Credit Guide
Whether a Licensee or a Credit Representative of a Licensee, you have an obligation to give your Credit Guide to a consumer "as soon as practicable" after it is likely you will provide that consumer with credit assistance. At QED Risk Services, we think this means as soon as you start discussing the client's personal business with them.
We also recommend that you talk the consumer through all the salient points of the Credit Guide. This not only ensures you have covered all your regulatory objectives, but also ensures that the client knows where you are coming from and that you are an independent broker.
Information to be in the Credit Guide:
• Licensee's name and contact details
• Licensee's ACL no
• Details and method for working out any fees payable by the consumer to the Licensee
• Details of the top 6 Lenders that the Licensee has introduced consumers to
• Details of the top 6 Lenders that a Credit Rep has introduced consumers to
• Any commissions that the individual (employee, director or credit rep) is likely to receive
• If the Licensee has a volume bonus arrangement with the lender, a statement that the commission payable by that lender may depend on volume written and that the commission may be volume driven
• Any commission that a third party is likely to receive for introducing the consumer to the Licensee (including how that payment will be worked out)
• The Licensee's IDRS and EDRS details
• Information about preliminary assessment and reasonable enquiries
• For Mortgage Managers, an explanation of the relationship between the mortgage manager and the lender, including any fee that the MM explicitly charges to the consumer for the service
Additionally, the Credit Guides of Credit Reps must contain the following:
• The Credit Rep's CR number and contact details
• Fees and charges payable directly from the consumer to the Credit Rep
• The names of the CR's top 6 Licensees
• Information about the CR's IDRS
Credit Quote
Unless you are charging a consumer a specific fee for your service ("fee-for-service"), you do not need to provide the consumer with a Credit Quote.
If you are not providing a Credit Quote, then either your Credit Guide must state that you do not charge fees; or your Credit Proposal Disclosure Document must state that you have not charged a fee.
Otherwise, a Credit Quote must be given. The Credit Quote must detail:
1. The services that are to be provided for the fee; and
2. The maximum amount that will be charged for the fee
The Licensee must not seek to charge more than the maximum fee stated in the quote and must not seek to receive payment of the charges before the services have been provided.
Credit Proposal Disclosure Document
These docs are supposed to be provided when credit assistance is provided. This is important. Credit assistance is only provided when either:
1. The Licensee suggests the consumer applies for or stays with a particular lender or product; or
2. The Licensee assists the consumer to apply for (or increase) a particular product with a particular lender
So the proposal doc typically does not need to be given until coming back to the client with a particular suggestion.
You actually provide credit assistance at the point that you suggest a particular product with a particular lender (or suggest the client stays with their existing product or lender), or when you assist a client to apply for a particular product with a particular lender.
Normally, you will have had time to go away and consider the client's position and will be coming back to the client with a specific recommendation. So, at that time, you should know the commissions that will be payable to you and the fees and charges applicable to the product you are recommending.
1. What are your commissions
2. What are the lenders different fees and charges - all of them itemised