While many people are getting satisfaction from watching the banks and other lenders get dragged over the coals, what many don’t realise is that the Royal Commission will likely impact you too.
While the Royal Commission has been nothing but positive for the financial services industry, we haven’t seen too much written about how all of this will impact the end-customer (i.e. you). In short, reformed lending processes and procedures will likely test your patience as you’ll be asked more probing questions by lenders, and the banks might even tighten their screws on certain types of lending.
To understand why things may get a little more difficult, here’s a quick “crash course” on the responsible lending obligations of lenders.
Any credit licensee engaged in consumer lending needs to comply with responsible lending as set out in the National Consumer Credit Protection Act 2009. In laymen’s terms, lenders need to ensure that they do not lend to a customer if the loan is unsuitable.
In order to meet responsible lending obligations, three steps must be undertaken for the lender to be compliant:
- 1. Make reasonable enquiries about the consumer’s financial situation, and their requirements and objectives;
- 2. Take reasonable steps to verify the consumer’s financial situation; and
- 3. Make a preliminary assessment (if providing credit assistance) or final assessment (if you are the credit provider) about whether the credit contract is ‘not suitable’ for the consumer (based on the enquiries and information obtained in the first two steps).
Now, if you have applied for a personal loan in the past you may be familiar with the loan application process, in which lenders will conduct certain checks on your income and expenses, and get your agreement on certain conditions. This is done in part to fulfil responsible lending requirements.
Since the Global Financial Crisis responsible lending criteria has tightened considerably to cut down on irresponsible lending. APRA and ASIC are demanding that lenders constantly review their lending policies to make sure they aren’t putting consumers at risk.
Post the GFC, the Royal Commission is the latest major event to reform lending policy and procedures in Australia.
How Will The Royal Commission Affect You?
Simple answer – loan applications may take more time. In an age where customers expect immediacy and instant gratification, the Royal Commission will likely create more prudent loan processes and procedures, which ultimately may test your patience. Lenders will likely ask you more probing questions, be more thorough in their checks on your income and expenses and ask for more documentation to verify your loan purpose and overall financial position. All of which will obviously take up more of your time. In some cases, the banks will simply reduce the amount of credit they will lend to certain borrowers.
So What Are We Doing About It?
OurMoneyMarket applies the latest technology throughout its application process to solve logistical problems such as the above, and to ensure we are providing a frictionless user experience. A good example of how we streamline the application process is that we directly pull applicant’s bank statements from their bank account via a secure online portal – too easy. This makes the income verification process quick and simple.
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Source: OurMoneyMarket Lending Pty Ltd ABN 64 605 231 669 Australian Credit Licence 488228.