Updated compliance documentation for asset finance - Arriving in Mercury March 3

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As you know, we’ve been updating our asset finance offer over the past year, including changing the name from Connective Plant & Equipment to Connective Asset Finance in order to cover the broader spectrum of products available to your customers. We’re now updating your compliance documentation to ensure you’re equipped with the tools and resources you need to meet and maintain your compliance obligations and protect your business whilst writing your asset finance deals.

These updated compliance documents can be found in the Compliance Wizard in Mercury from March 3. If you’ve been writing asset finance deals for a while, you’ll need to select “Plant & Equipment” as the opportunity type – then the Compliance Wizard box will appear in your second tool bar, giving you access to the documents in sequential order. If you’re relatively new to using our asset finance offer, the selection will appear as “Connective Asset Finance” rather than “Plant & Equipment”, but Mercury will provide you with access to the same documentation.

What is changing?

We will be updating the Needs Analysis questionnaire and Preliminary Assessment document in Mercury on Friday March 3. The major enhancement is the addition of the customer identified monthly living expenses into the Needs Analysis which will auto-populate into the Preliminary Assessment. This will provide you with a process that is the same as the process you currently use to complete the compliance documentation for a residential loan.

These changes are designed to provide you with greater adherence to your Responsible Lending obligations under the National Consumer Credit Protection Act 2009 (NCCP) when writing your asset finance deals.

What are the obligations under NCCP for asset finance deals?

Under NCCP, your Responsible Lending obligations apply to any contract that is for personal, household or domestic purposes. That means that your obligations are the exactly the same for asset finance transactions as they are for home loans.

To remain compliant, you must undertake the following three key steps:

  1. Make reasonable inquiries into your customer’s financial situation, requirements and objectives.
  2. Take reasonable steps to verify the customer’s financial situation, and
  3. Make a preliminary assessment about whether the credit contract is ‘not unsuitable’ for the customer.

Please remember the level and type of enquiries you make for each customer will vary depending upon the circumstances, including the customer’s own answers within the enhanced Needs Analysis questionnaire. If you uncover matters that may impair a lender’s decision to provide credit to that particular customer during the course of your analysis, you may need to make further inquiries to ensure that the product is not unsuitable.

Are the obligations different for arranging a lease rather than a loan?

As mentioned above, your Responsible Lending obligations apply to any contract that is for personal, household or domestic purposes – and that includes leases as well as loans.

Your compliance obligations when providing credit assistance for consumer leases is defined in Section 8 of the National Consumer Credit Protection Act 2009 (NCCP). It states that:

“A person is providing credit assistance to a consumer if, by dealing directly or indirectly with a consumer in the course of, as part of, or incidentally to, a business carried on this jurisdiction by the person, the person:

  • suggests and/or assists the consumer to apply for a particular consumer lease with a particular lessor, or
  • suggests that the consumer remain in a particular consumer lease with a particular lessor.”

Therefore, if you have a client wishing to purchase a vehicle for personal use, then NCCP obligations apply whether you help them arrange a lease or a loan. All compliance documents must all be completed for every Connective Asset Finance application, regardless of whether it is a lease or a loan. These include:

  • Credit Guide,
  • Quote (but only if you are charging a fee for your services),
  • Needs Analysis,
  • Credit Proposal Disclosure,
  • Preliminary Assessment,
  • Checklist
  • Also remember to keep detailed File Notes about the provision of the above and your customer interactions.

Please note: these requirements are mandatory for Connective Credit Representatives and are our best practice recommendation for ACL Holders and their staff.

Use the Compliance checklist to make it easy.

The following checklist outlines what action is required and when each compliance document should be completed – Download the checklist HERE: Compliance Document Checklist.

What is best-practice compliance for asset finance supporting documentation?

For each Connective Asset Finance lease or loan, the following supporting documentation should be completed and held on file. Again, these requirements are mandatory for Connective Credit Representatives and are our best practice recommendation for ACL Holders and their staff.

Collecting this supporting documentation for your asset finance deals provides evidence that you have demonstrated your adherence to your Responsible Lending obligations:

  • Identification documents – photo ID and additional
  • Income verification documents:
    • PAYG: The most recent, 2 consecutively dated payslips and one of the following: PAYG summary, ATO notice of assessment, or full tax return.
    • Self Employed: Two years personal tax returns and correlating ATO notice of assessment, two years tax returns for all entities (company, trust, SMSF), and two years profit and loss statements (if applicable).
  • Three months of transactional account statements – confirmation of salary/income deposited, evidence of additional income, regular deductions and other credit commitments, and assist to identify the client’s monthly living expenses.
  • Lender and other supporting documents (such as Rates Notice, Refinance loan statements, etc.)
  • Contract of Sale – Vehicle (or other if writing a loan for a different kind of asset).

Please note: Tax File Numbers must be removed from income/financial statements and documentation for your asset finance deals, just as they are for home loans.

Remember to sight the original documents!

Original documents should always be sighted and copied for any kind of lease or loan. (Photocopies are not acceptable.) If you are unable to sight the original documents in person, then legally certified copies of identification documents are required prior to providing credit assistance. Document copies must be good quality and legible and include:

  • Full Name, Address and Date of Birth where shown on identification documents, must be in English or translated by an authorised translator (NAATI)
  • Unless otherwise indicated, only current (‘in date’) identification is acceptable
  • Identification must also be collected in adherence with Lender specific requirements.

Finally, we have also provided a generic paper based Fact Find – Needs Analysis document to help you capture information about your client’s personal and financial situation and analyse their needs and objectives for borrowing. This document can be located in Documents > Merge Templates > Asset Finance-Compliance folder.

Please contact the Compliance Team with any questions!

Remember, your compliance requirements are virtually the same for your asset finance deals as they are when you are writing residential home loans, so these procedures should be easy to follow. But if you have any questions at all, please contact the Compliance Team and we’ll be happy to help. Just click the help icon in Mercury or email us directly at compliance@connective.com.au