Evolution of Credit Advice with Technology
In the present context, one might ask – what role does technology play in the National Credit Code equation? More exactly, is it in any way related to providing credit advice? This question is actual, relevant for the time being, and I thought I should find the answer.
Perhaps you already know that having an Australian Credit Licence is necessary when credit advice is offered, in the case in which the National Credit Code applies.
We’ll consider the ASIC definition of credit service, which is one of two things. The first one is when an entity behaves either as an intermediate between a credit provider and consumer. The second definition includes the notion of offering credit assistance or credit advice.
Credit Advice in Modern Times
Namely, there are two particular circumstances in which ASIC cares for credit advice. The first one is encouraging a customer to adopt a new, specific product with an individual provider, or remain in their existing contract. The second circumstance is offering customer assistance by completing a particular application for credit, with a given credit provider. To my mind, this definition is, by all means, odd.
Let’s aim at chronologically mapping the lengthy process of loan application, using a broker’s service.
- First, the broker comprehends what a consumer aims at doing, and will complete a detailed personal profile on them.
- Secondly, the agent will browse the market for lenders that offer credit policies that match the consumer profile. Additionally, he/she will create a comprehensive list of lenders.
- The broker shortlists the choices by accounting for the user’s personal financial background.
- The broker will discuss several options with the customer, answering factual questions. However, do remember that agents cannot provide you with credit advice. Hence, questions regarding negative gearing or other similar ones will just place the broker in an awkward situation.
- Once a lender is picked, the agent will assist the consumer in completing and submitting the loan application.
Given the growth of sophisticated, state of the art software, all these steps may be carried out electronically. The question is – where is the credit advice component in this equation? There isn’t any. Apparently, the assertion of credit advice isn’t specified in the National Consumer Credit Protection Act 2009.
A broker’s expertise might need to change, and concentrate on the intangibles of lender selection, by offering a customer input on lender processing, for instance. Brokers may also provide further value in the post-submission file point. The odds are that ASIC might need to reconsider the activities that imminently imply a credit licence, as well as clarify some of the current definitions, as they have become irrelevant in the current context.