Action: You have not fully completed the Best Interests Duty sections of the Compliance Centre. Please complete.
What you must do:
Please ensure the mandatory fields in the compliance centre have been completed, being (1) your customer’s requirements and objectives and (2) the reason(s) for the final choice of lender. Once you have completed both of these fields, the information entered will automatically populate into the Summary of Requirements and Credit Proposal document.
After documenting the customers' requirements and objectives and reason for the final choice of lender, please reissue the Summary of Requirements and Credit Proposal document to your client for signing. Ensure both the completed document is held on file and a copy of the email evidencing this has been supplied to your client.
Why is this important:
For all loans lodged post 1 January 2021, you must be able to evidence you have complied with the Best Interests Duty obligations. Documenting the customer’s requirements and objectives and the reason for the final choice of lender are key to evidencing you have complied with the obligations.
As a Connective Credit Representative, the updated Summary of Requirements and Credit Proposal with this information is key in evidencing your adherence to the duty. More information on documenting the BID obligations can be found in the following article: BID Examples - Documenting the Summary of Requirements (Handy Hints)
Action: Please insert additional commentary in the Compliance Centre regarding how you complied with Best Interests Duty.
What you must do:
Please provide further commentary on the customers’ requirements and objectives and the reason for the final choice of lender in the Compliance Centre.
Completing a detailed summary is key to confirming the steps you have taken to act in the customer’s best interests.
Needs and requirements should confirm the following:
Needs – example the customer needs finance for the purchase of an owner-occupied property
Objectives – what does the customer want to achieve? (i.e. to make accelerated payments and be debt-free prior to retirement)
Requirements – consider the customer’s product preference, lender preferences and priority preferences
Reason for the final choice of lender:
Consider the conversation you had with the customer when discussing the final lender options considered. What was the reason why this lender was selected over the other choices?
More hints and tips as well as examples from your broker peers can be found in the following article to assist you in documenting your BID obligations, BID Examples - Documenting the Summary of Requirements (Handy Hints).
Why is this important:
For all loans lodged post 1 January 2021, you must be able to evidence you have complied with the Best Interests Duty obligations. Documenting the customer’s requirements and objectives and the reason for the final choice of lender are key to evidencing you have complied with the obligations.
Action: There are insufficient notes and correspondence. Please upload all communication.
What you must do:
Please ensure all communication is held on this opportunity. Communication includes the following:
Emails
Diary notes
Text messages
A file note should be recorded for every client, lender and third-party interaction which demonstrates a timeline of communication to meet your Best Interests Duty and general compliance obligations. File notes should cover meetings, phone calls, verification steps, internal notes and are in addition to emails and text messages.
Communication should cover any party involved in this transaction, including (where applicable)
Client
Lender
Client’s accountant or financial planner
Client’s legal representation (Solicitor, conveyancer)
Valuer
Referral partner
Real estate agent/builder
Please upload all communication to the opportunity.
Why is this important:
In ASIC’s updated Regulatory Guide on Responsible Lending (RG209) released in December 2019, ASIC clearly note that records must be retained together including communication to clarify aspects of the customer’s requirements and objectives (RG209.267).
Keeping an accurate record of how you provided disclosure documents (for example evidence of emailing the Credit Guide) also confirms you have adhered to the NCCP legislation.
Importantly, in the event of a dispute or a customer complaint the copies of emails and notes become key in evidencing the steps you have taken to comply with NCCP and BID.
ASIC further note “if these communications are not properly recorded on the consumer’s file, you may not be able to demonstrate that you have complied with your obligations. Keeping file notes or other records in one place may help you to explain what steps you have taken, and why those steps are reasonable in the circumstances of the consumer.” (RG 209.268).
Action: Only one choice of lender is in the product comparison. Please document how you met your Best Interest Duty obligations and why a choice of lenders was not recommended.
What you must do:
Where only one choice of lender has been presented to your clients for consideration you must document why additional options were not considered and how you acted in the customer’s best interests when a range of options were not presented.
Why is this important:
One of the key steps in adhering to the Best Interests Duty obligations is to present recommendations and choice to your clients on a range of options that meet their requirements. If there is only one lender which is suitable, it must be clearly documented why a range of options were not considered. This could be due to the client’s individual circumstances whereby they will only meet the policy of one lender however this must be sufficiently documented.
Action: Provide evidence that you have explained in writing to your customer how you have met your Best Interests Duty obligations.
What you must do:
Please provide any evidence which supports the steps you have taken to comply with the best interests duty obligations. This includes the steps taken to:
Confirm to the customer you have clearly understood their needs, requirements and objectives;
Steps taken to educate the customer throughout the process; and
Steps taken to present the information about options including one or more product recommendations;
Why is this important:
Even before the introduction of the Best Interests Duty obligations, ASIC referenced a narrative summary document in the updated responsible lending guidance (RG209) released in December 2019.
ASIC noted, “A concise narrative summary included on the consumer’s file can help you to ‘connect the dots’ between the consumer’s responses to different questions and demonstrate that you understood what the consumer’s requirements and objectives were and how the credit product that was applied for or entered met those requirements and objectives.” (RG 209.270)
In ASIC’s Regulatory Guide 273: Mortgage Brokers: Best Interests Duty, ASIC further confirm that a narrative summary is recommended to confirm the steps you have taken throughout the process to act in the customer’s best interests. This narrative summary should be evidence-based and supported by contemporaneous records.