How are Brokers Regulated?
How are brokers regulated?
The National Consumer Credit Protection Act 2009 (NCCP) requires that all credit providers are licensed and must abide by responsible lending obligations set out in the Act, as well as participating in a mandatory External Dispute Resolution scheme.
Any brokerage providing finance to consumers must hold an Australian Credit License, and any broker providing finance must be an authorised credit representative of an Australian Credit Licence (ACL) holder.
All employees of an ACL holder are automatically covered by that license during their work.
If a broker is not an employee of an ACL, they must be an authorised credit representative to provide finance.
How do I check if loan brokers are licensed?
The ACN should be displayed on the company website and all transactional communication. You can confirm that it is genuine by searching on the ASIC website for the company name or the license number.
What are the key laws that brokers are regulated by?
The NCCP contains a detailed National Credit Code that outlines in detail all the record-keeping and responsible lending requirements that an ACL holder is bound to comply with.
Some of the key provisions you need to know are:
Comparison rates in advertising
Part 10 of the NCCP requires that credit providers and loan brokers include a comparison rate when advertising fixed term credit for personal domestic use. The comparison rate includes:
- Interest rate
- Most fees and charges that apply to the loan.
This helps you to compare the true cost of different loan products. Note that it doesn't include some fees, like government fees or charges that only apply in certain situations, such as early payout fees. It also doesn't take into account other attractive features like access to fee-free accounts or flexible payment options.
Training and competence
All staff and authorised representatives are required to maintain up to date professional education in the requirements of lending.
At Positive Lending Solutions this means that all customer service representatives have a complete knowledge of all the legislative requirements and lender policies, and can advise you which loans are most suitable for your financial profile.
Credit guide and quote
When you apply for credit, you must be provided with detailed information regarding the lender you apply with, as well as the specific loan product you apply for.
Responsible lending practices
Before you are offered a credit product, your lender and broker must ascertain that the product being offered meets your needs and is the most suitable product for your specific financial situation. This is why a car loan broker collects information about your current finances before giving you a firm quote for a car loan.
How are Positive car loan brokers different?
The car loan brokers at Positive Lending Solutions will always put the clients best interests first.
That means that even if you could be eligible for a car loan, if it would put undue pressure on your finances, your broker will advise you what steps you can take to improve your financial situation before signing up for the loan.
It also means that your broker will look outside the box to ensure you get the best value for money on your car finance. They won't try to fit you into a particular product, rather they'll find a product that has the features and flexibility that you need to maximise your financial potential.
Who pays a broker?
In some circumstances, the broker is paid a commission by the bank or credit provider.
Brokers usually charge an application fee for arranging the loan. This amount is usually financed within the loan and is not payable unless the loan settles.
Is the car loan industry a 'cowboy' industry?
This is an old concept that developed because dealership finance is not covered by the NCCP and the National Credit Code, so dealership finance is known for having a bit of a cowboy culture. However, dealership finance should not be confused with using car loan brokers.
Car loan brokers have been regulated by federal legislation administered by ASIC, the National Consumer Credit Protection Act, since 1 July 2010, and before this was regulated under state-based consumer credit codes.
While there are some 'bad eggs' out there, the cowboys have largely moved on. Those that are left are being forced out as ASIC clamps down on responsible lending requirements under the National Credit Code.
What are the benefits of using car loan brokers?
There's a clear advantage to using car loan brokers over a dealer or a bank: More choice.
A dealer or bank will only have a few products available, and may not have the right product or the best product for you. A car loan broker can find a product that meets your needs better from a wide selection of bank and lender products.
At Positive, our car loan brokers can talk you through the application process, regulatory requirements, and assess your financial profile to match you with a car loan that's the best possible fit.