I remember the approach of the new (then) National Credit Code (NCC) back in 2010. My initial reaction was to try and ignore it.
Luckily Karen, my wonderful wife, was clever enough to realise how important the NCC would be to our Vendor Finance business and managed to pull my head out of the sand 😉
It’s Actually Helped
Prior to the NCC and its Responsible Lending requirements, we sometimes got lazy and put the wrong people into our properties and boy, did we paid for that laziness down the road. With the arrival of these Responsible Lending requirements we’ve had no choice but to qualify our prospective buyers a whole lot more.
The result — our Application and Qualification processes are now greatly improved and the resulting decrease in mistakes around choosing a buyer has actually improved our businesses’ bottom line. Regulation improving our bottom line! Unheard of
What’s An ASIC Audit Like?
I’d like to thank the vendor financier who sent through the following description of how his visit from ASIC went down. I’m sure you’ll find it a very interesting read:
‘Just wanted to give you some feedback on how my ASIC audit panned out and the info I got. Feel free to use, edit, include in future newsletters if you see fit and share with other vendor financiers.
Despite being scared shitless, it was quite relaxed, open and non-confronting 🙂
The auditor and young trainee came down to visit my home and office. The interview went for approx 1 hr. I have only completed two Instalment Contracts since getting my ACL and had two Carried Over Instruments from before 2010, so I’m certainly not very active and this was expressed in the interview and hence a little more informal.
They wanted to get a better understanding of how vendor finance (VF) and Instalment Contracts work, potential conflicts and systems to combat this. They were very happy with my operations manual, which is the one I developed with help from your Vendor Finance Institute. Since setting that up I’ve done a small number of simple changes, e.g., revision dates, etc.
The main, number 1 thing we spent a lot of time talking about that seems to be a concern for ASIC, is Internal Dispute Resolution (IDR). They acknowledged I have only done a couple contracts, but suggested that it be developed some more. If I had done 5+ contracts they would definitely want more detail in my IDR. They suggested more of a flow chart system and or a step by step guide/procedure that will be very closely adhered to, the more detail in an IDR system the happier they will be.
We also discussed where credit providers get their advice from, as ASIC don’t give advice, more along the lines of ‘guidance’. I mentioned that VF’ers have the Vendor Finance Institute and the Vendor Finance Association. I explained that the VFI News and Association meetings are very detailed and relevant for our industry and run by people that still operate in the business. (no names were given), however sometimes we feel a little isolated from other organisations due to our smaller market and other forms of VF type transactions (lease options) so it doesn’t fit under many “banners” i.e. FBAA, insurance providers etc.
His feedback was very good. As long as you are seen to be continuously seeking advice from who you think is the best possible source you should not be too worried. You can only act on the advice given, if there is a breach of some sort, the place you have got advice from will also be questioned. However, if you act willy nilly, lack advice and industry guidance and there is a problem – you will be in a whole heap of trouble.
Continuing on from this, I asked about advice, as whilst it is finally getting better we have previously had hurdles with solicitors and advice in our State. I asked if there would be any dramas using interstate law firms. The feedback I got was great, as it is a national code, you can source advice from anywhere, just bare in mind state requirements ie; mainly stamp duty etc.
CPD. They looked at the register I gave them and as long as you have logged 20hrs it seems to be all good. Reading material can also be logged (max 5hrs/yr) so your VFI News and the Creative Property Magazine would fit in this category.
That’s about it really mate that is worth reporting, all other manuals were discussed briefly ie; hardship procedure, IT systems, etc. but they were pretty quickly ticked off his check list.
Sorry for the long winded email buddy, but yourself, and the Siaccis have been a great source of information and guidance, you don’t get the recognition you deserve, so hopefully this info can be of some use for you. If you have any Q’s please give me a hoy.’