Dover holds an Australian Credit License (ACL) and is authorised to provide credit advice since the introduction of the credit licensing regime in 2010.

However, Dover does not license any of its advisors to provide mortgage broking advice. Other credit licensees or aggregators (as they are commonly known) do this very well and Dover advisors can be licensed under another credit license to provide mortgage broking advice.

This Practice Note gives you an idea of what you can or cannot do if you are not authorised to provide credit advice. The scenarios below are common when giving financial product advice.

You can:

You cannot:

Advise the client to pay off the more expensive loan

Advise the client to re-structure their existing loans

Advise the client that their loans may not be suitable and they seek advice from a mortgage broker

Advise the client that their loans may not be suitable and they seek advice from a specific bank/loan provider OR a mortgage broker who only deals with a limited range of credit products

Advise the client that they consolidate their loans or credit cards

Advise the client to consolidate their loans or credit cards to a specific credit provider

Advise the client to borrow to finance a property purchase

Advise the client to borrow to finance a property purchase from a specific bank/loan provider OR a mortgage broker who only deals with a limited range of credit products

Advise the client to make use of a cash offset account to reduce interest payments

Arrange for the cash offset option to be set up for the client (this is known as ‘credit assistance’)

Provide the client a form to complete if they want to apply for a loan of their own choosing

Help the client complete the form or explain what the application requires (this is known as ‘credit assistance’)

Refer a client to a mortgage broker and provide the broker’s details to the client

 

Accept a fee for referring your client to a particular mortgage broker and this is disclosed to the client in writing

Accept a fee for referring your client to a particular mortgage broker if you do not disclose the fee to the client

Pass on your clients details to a particular mortgage broker within 5 business days if you have obtained their consent in writing to do so

Pass on your clients details to a particular mortgage broker if they have not provided their consent to do so or it has been more than 5 business days from the time the clients provided their consent (this is known as ‘acting as an intermediary’)

Advise the client to speak to their bank/loan provider to renegotiate their loan on the basis of financial hardship

Renegotiate a new contract with the bank/loan provider on the client’s behalf (this is known as ‘credit assistance’)

Advise the client to use their surplus cash to pay off their loans faster (even if the client has 1 loan/credit card)

Renegotiate a new contract to ensure the client can pay it off sooner

Advise the client to borrow to fund an investment strategy

Advise the client which type of structure or loan facility is suitable (unless it is a margin loan which is not a credit product)

Provide information about market interest rates and advise the client if they are paying well above the marketing interest rate

Advise the client to renegotiate/refinance their existing home loan (this is known as ‘credit assistance’)

Provide client documents to your client when requested if they were required for securing a loan

Provide details to the bank/loan provider/referral on behalf of the client for the purposes of securing a loan, even if the client provided their consent to do so (this is known as ‘acting as an intermediary’)

Provide factual information to verify the information already supplied by the client to the bank/loan provider

Provide additional information to help the client secure the loan including providing an opinion about the client’s ability to meet the loan obligations (this is known as ‘acting as an intermediary’)

Prepare a budget or cash flow statement with the client as part of your financial plan, where it includes expenses relating to their loans (existing or new)

Provide an opinion or statement about a client’s ability to meet their obligations under a particular loan/credit contract (this is known as ‘credit assistance’

Provide factual or general information to the client on request

Provide factual information from a particular credit provider that directly compares to their existing loans

Provide information about typical features of a home loan

Provide information about features of a home loan from a specific bank/loan provider

Advise the client to borrow to invest in shares

Arrange for the redraw option on their existing loan or advise the client how to obtain this

How to disclose your referral arrangement?

Via email: Referral Arrangement

Dear client,

As discussed, I have a relationship with XXXX, a mortgage broker who can assist you with your home loan needs. XXXX will pay a referral fee of Y% of any commissions they receive if you apply for a new loan through them. For example, if they receive a commission of $5,000, they will pay me a referral fee of Z%.

So I can provide your details to XXXX, please reply to this email as confirmation of your consent. I will only provide your contact details. If any specific documents are required, XXXX will communicate this with you directly.

I look forward to your reply. If you have any questions about this referral arrangement, please do not hesitate to contact me.

Note: You can also communicate via a letter, and the consent must be signed by the client.

What you should consider when providing financial product advice to avoid inadvertently providing credit advice:

  1. Avoid providing ‘credit assistance’ or ‘acting as an intermediary’
  2. Do not mention specific products unless you are certain you are not providing credit advice
  3. Do not refer clients to mortgage brokers who only deal with a limited number of credit providers
  4. If you prepare budgets/cash flow as part of your plan, make sure you detail your assumptions on any expenses relating to their existing/new loans. Always allow for movements in interest rates.

Are there any exemptions?

Advisers who are also legal practitioners are exempted from the credit legislation if they provide credit assistance as a result of their activities as a lawyer. For example, a lawyer can review a credit contract, or assist a client to complete a document on the client’s instruction.

Advisers who are also registered tax agents do not need to be authorised to provide credit assistance if they are provided in the ordinary course of their activities as a registered tax agent. For example, if a tax agent provides a statement of financial position to assist a client in applying for finance. At no point should the registered tax agent express their view as to whether the client can meet the repayments.

Should I become a credit representative of Dover?

If you are concerned you are providing credit advice or services,  please contact Florence Tee on 03 8516 5352 to discuss.

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