Courtesy Investments Pty Ltd adheres to NCCP responsible lending obligations which are founded from the following regulatory guide in particular RG209. The objective of the responsible lending obligations is to ensure that the credit contract or lease is ‘not unsuitable’ for the consumer.
The National Credit Act defines situations where a contract will be unsuitable to include where:
• the consumer will be unable to meet the repayments or can only comply with substantial hardship; or
• the contract does not meet the consumer's requirements of objectives.
The responsible lending obligations also require that credit assistance is not provided to a consumer by:
• suggesting they remain in an unsuitable credit contract
• assisting them to enter into, or increase the limit on an unsuitable credit contract
• suggest the consumer apply for, or remain in an unsuitable consumer lease
• assisting the consumer to enter into a consumer lease that will be unsuitable for them
Courtesy Investments Pty Ltd breaks the process down into three steps:
1. Make reasonable inquiries about the consumer
2. Make a preliminary assessment whether the proposed credit contract is not unsuitable for the consumer
3. If requested, provide a written assessment that the credit contract is not unsuitable
This is primarily done through the collection and verification of all identification items, the verification of all financial statements and documents and an assessment is done to the validity of the loan. All responsible lending obligations are also in correlation to the particular lender and their policies are also used. In accordance with responsible lending obligations, and in determining whether a loan is not unsuitable for a consumer, an assessment must be undertaken of the consumer’s financial status, reasons and objectives for obtaining the loan.
There are two primary questions that must be kept in mind when undertaking a preliminary assessment and these must be answered in the affirmative prior to granting a loan:
• Will the consumer be able to meet their financial obligations under the credit contract (ie, have the capacity to repay the loan) without substantial hardship?
• Does the credit contract meet the consumer’s requirements and objectives?
The first step, is finding out what are the consumer's requirements and objectives in obtaining the loan. The second step is obtaining from the consumer details of their income and their outgoings.
The information that is obtained from the consumer must by law be ‘verified’- reliance on the consumer’s word is never sufficient. ASIC gives some examples of the types of information that franchisees could use to verify a consumer’s financial situation, including:
• For PAYG employees: recent payroll receipts/payslips and confirmation of employment with the employer.
• For self-employed consumers: recent income tax returns, a statement from their accountant and Business Activity Statements.
• For all consumers: credit reports, information/reports from other lenders and bank account or credit records held by the credit provider.