When boat buyers take out a loan to purchase their boat, there are strict regulations legislated in law, that lenders must comply with in regards to consumer finance. In this article in our educational series, we explain the responsible lender regulations and obligations that Jade Boat Loans must adhere to when sourcing your boat loan. The regulations are in place as safeguards for consumers and this information is our contribution to ensuring you are well-informed in regard to the boat loan process.
At Jade Boat Loans we are constantly emphasising that we streamline the boat loan process when sourcing our customers the best boat loan available. However, some customers may consider all the information we both request and provide and the number of steps in the process to be excessive. Our response to that – our consultants are compelled to adhere to both the legal and regulatory obligations as set by the Government and the Jade Boat Loans internal processes which ensure we do comply as a responsible lender.
Jade Boat Loans is a licenced finance broker, known in the regulations as a credit licensee and as such must comply with the National Consumer Credit Protection Act 2009 in regard to the obligations and conduct of responsible lending. The section of Government regulation comes under ASIC which is the Australian Securities and Investment Commission. If lenders do not comply with the regulations, penalties apply and legislation was passed in 2019 which further strengthened these penalty for misconduct in the financial sector.
When you’re applying for a boat loan to purchase a boat for your own recreational use, as opposed to a business vessel acquisition, this is a consumer boat loan. To ensure you are well-informed around your rights, this article details the Responsible Lending Guidelines so you understand how and why your Jade Boat Loans consultants handles your boat loan.
ASIC: Role of the Regulator
ASIC is the independent Australian Government body which is tasked to regulate a wide range of financial services in Australia. Specifically consumer credit, financial markets, finance services providers and corporate activities. In the consumer credit sphere, the National Consumer Credit Protection Act is administered by ASIC. This Act clearly sets the regulatory guidelines that all lenders – banks, finance companies, finance brokers and others – must adhere to in the process of consumer lending.
Penalties apply if licensed lenders fail to comply with these responsible lending guidelines. Your Jade Boat Loans consultant is operating to meet these guidelines at each step of your new boat loan process.
Responsible Lending Guidelines
Businesses and individuals that provide consumer loan services are required to be licenced as per ASIC requirements. In the ASIC documents, they are known as ‘credit licensees’. Jade’s credit licence number (ACL) is 484387, for your reference. The law requires us to display this ACL in many places throughout our advertising, websites and documentation.
As a credit licensee, Jade must follow the guidelines set by ASIC. An essential component is the responsible lending conduct obligations which are detailed in the Act. The Act requires all credit licensees to determine their own operating processes and procedures that ensure they will comply with the obligations when dealing with consumer lending.
A very significant inclusion in those obligations that you need to be aware of is that a licensee is not permitted to enter into any credit contract, in this case off consumers a boat loan; or propose a credit contract; or provide assistance to a person to apply for a credit contract, IF that contract is deemed unsuitable for that particular person.
That means simply that Jade Boat Loans cannot make an offer of a boat loan to you if that loan is not suitable for you.
So how would a credit contract or offer be deemed unsuitable? It relates the processes that credit licensees implement to ensure they comply with responsible lending obligations. Jade Boat Loans has established its own practices that ensure our consultants cover the relevant issues and checks to confirm that the boat loan we offer you is suited to your individual financial position.
Obligations for Lenders
There are two distinct aspects of lender obligations that ASIC require all credit licensees to adhere to in regard to consumer loans:
- Establishment, implementation and adherence to clearly set defined protocols and practices for the process of the checking and verification of the financial situation of customers and the assessment of a particular boat loan as suitable to that individual
- Disclosure of information: lenders have an obligation to disclose, that is provide, clearly specified information and documentation to each loan applicant to enable that person to both understand the services provided by, in this case Jade Boat Loans, and understand the particulars of the boat loan contract that is offered.
By knowing what obligations we have to comply with as responsible lenders we hope you will have a greater understanding of the boat loan application procedure and appreciate why Jade consultants are so thorough in sourcing the secured boat finance that is suitable for your requirements.
We’ll now cover both these aspects in more detail.
The Jade Protocols
To meet the responsible lender obligations as set out by ASIC, Jade Boats Loans has a specific Responsible Lending Flow Sheet which our consultants implement. This details the individual steps that we undertake when dealing with consumer boat loan customers.
The protocols and processes are:-
- A copy of the Credit Guide must be provided to each customer that a consultant discusses finance with. The consultant retains a record of when the credit guide is issued to the customer as part of our stringent internal requirements.
- The application submission must include a Credit Quote which is required to be signed when a DOF is proposed.
- The boat loan applicant must sign the privacy statements as confirmation that the consultant has advised the customers of issues pertaining to the sharing of any of their information with our lenders for the sole intention of securing a boat loan offer or quotation.
- A detailed credit check is undertaken. This involves checking credit history and scores; the verification of address history; and checking history of directorships.
- Financial Capacity Check. This involves the verification of information in regard to a customer’s financial situation as provided.
- Living Expenses Check. This is done verbally as it allows the consultant to confirm that every living expense is included. On completion, the customer is sent a copy to confirm the process of discussing living expenses was carried out and to confirm the expenses that were discussed.
- A ‘Pre Lim’ is completed by the consultant. This document confirms that the Jade Boat Loans consultant is in the process of reviewing and assessing the customer’s needs.
- The next step is to send the customer a Credit Proposal. This advises how that particular consultant is proceeding with the customer’s enquiry or their application, it includes the total amount of the loan that is involved, the proposed schedule of repayments and additional details in regard to the boat loan.
- If the customer has requested that a ‘balloon’ amount be included in the boat loan, the consultant must discuss with what form of payment the customer intends to finalise that payment at the due time.
- Fully-inclusive notes are retained by the Jade consultant throughout each step and each stage of the process. These notes include the timeline of interactions between the customer and the consultant.
These stringent protocols ensure that Jade Boat Loans adheres to the responsible lender obligations and that we are addressing the best interests of each customer in a highly responsible manner under the law.
The other aspect of the responsible lender obligations is in regard to disclosure. Jade Boat Loans has an obligation to make sure that every customer – from a general enquirer through to requesting quote through to those that finalise a boat loan – receive the required information.
ASIC’s Responsible Lending Obligations lists which documents and what additional information must be given to consumer loan customers. This information is intended to allow consumers to fully understand the type and specifics of the credit activities that Jade Boat Loans provides.
The documents and information also assist the customers to understand their consumer rights, comprehend the inclusions in any offers and contracts offered to and provide the assistance they may require arrive at their decisions.
These are the documents specified by ASIC that Jade Boat Loans is required to provide to customers:
- Credit Guide – preliminary information covering general consumer credit issues.
- Quote of Services – this details the fees and costs of the services that a credit licensee proposes to charge the customer. The quote must be accepted with the customer’s signature and date of signing/acceptance.
- Proposal Document – this includes the costs of services consumer particularly any commission which is being obtained by that credit licensee.
- Written Assessment – a document which declares that a credit contract, ie the boat loan, has been assessed as not being suitable for that customer.
The Jade Assurance
Jade Boat Loans is committed to complying with Responsible Lender Regulations as stipulated by ASIC and in addition, provide customers with the assurance that we are always acting in their best interests.
Significant penalties can be applied by ASIC for lenders, brokers and banks that fail to comply with the ASIC regulations. With this information that we have provided, you are now equipped to check that any other companies you choose to engage with in regard to consumer finance also comply with their legal responsibilities.
If you have any questions around any aspects of consumer finance, please contact Jade Boat Loans and one of our consultants will assist you. Call 1300 000 003