Preparing for BID - Product Requirements
Updated
by
Caroline Pollard
This week we look at the 'Product requirements' tab in Chief to help prepare you for the introduction of Best Interests Duty (BID) on 1 January 2021.
As part of your Responsible Lending obligations (under RG 209.43), you must make reasonable inquiries about your client's financial situation, requirements and objectives. Although the Responsible Lending obligations and BID are distinct obligations (as stated in RG 273.23), the information gathered for the purpose of Responsible Lending may help you to determine what is in your client's best interests.
In order to make your recommendation, you must complete the following sections in the 'Product requirements' tab:
· Rate type (e.g. fixed rate, variable rate, fixed and variable rate)
· Repayment type (e.g. principal and interest, interest only, interest in advance, line of credit)
· Product type (e.g. offset account, redraw)
· What is most important for you?
· Term of credit sought
Are the loan product and features important to your client?
Each feature should be marked as ‘Important’, ‘Not Important’ or ‘Do Not Want’, depending on your discussion with the client. If a client deems a feature 'Important', you need to adequately document why these features are important and how they will help the client to achieve their needs and objectives. In Chief, you can select the appropriate reasons or select the 'Other' checkbox to capture another reason.
What's changing in Chief?
Chief has already been enhanced throughout 2020 in preparation for BID, with the completion of the above sections in the 'Product requirements' tab to be made mandatory next month.
As per RG 273.45, in order to meet the BID you will need to understand your client's needs, goals and financial situation. The information captured within the 'Product requirements' tab will continue to populate information into the 'Credit Proposal & Preliminary Assessment', supporting your recommendation. Further enhancements in Chief will ensure that the disclosure documents represent the full assessment that has been made into the client's product requirements and will provide more clarity on the reason for product selection.
It is also important that all information provided is accurate and complete. RG 273.42 states that a Mortgage Broker who provides incomplete or inaccurate information will fail their BID obligations, even if the inaccurate information would increase the likelihood of approval or give your client access to better terms.
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