Car Finance Borrowers don't just need a car! 'Requirements and objectives' for Asset Finance Responsible Lending
QED has revisited the Judgement in an important case, ASIC v Channic (2016) for some further guidance on the topic of Responsible Lending for Asset Finance.
We've all been pretty clear on requirements and objectives in the housing loan area for a long time. There are all sorts of product features and admin considerations concerning specific lenders that give us enough to match a client up to the right home loan for their circumstances.
However, in asset finance, what brokers have been telling us for years is "What requirements? They want to buy a car!" The judgement in the above case looked at this and asked the following:
- How big a loan does the consumer want?
- What sort of interest rate does the consumer want?
- What sort of loan term does the consumer want?
- Does the consumer want the loan amount to include the brokerage payable?
They might sound like stupid questions in that the consumer really doesn't have a choice in the matter. Or do they? Does the consumer really want a loan for $10,000 at 48% over 4 years, including a significant brokerage fee capitalised to the loan for buying a rubbish used car?
Again, QED hasn't quite closed out on the solution for this but we're close. The solution is likely to be as simple as making it part of your sales process that you will confirm with the client that this is the size, type and length of loan they want and that this satisfies their needs. You may or may not want to supplement that with a "sign here". It's about demonstrating that you considered the consumer's requirements and objectives before ploughing ahead.