For Credit Representative Use Only
– Responsible Lending: Conflicts of Interest [V1] 3/12/2013 -
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Responsible Lending: Conflicts of Interest Procedures
Policy: The Conflicts of Interest Procedures set out the steps that should be taken to identify any
potential conflicts, assess the conflicts and ensure they are handled appropriately. The procedure
must be followed in all cases and no later than when undertaking the preliminary assessment.
Step 1: When Conflicts of Interest Arise
If there are any conflicts of interest which may influence your lender / product selection and
recommendations to your clients, these conflicts must be:Disclosed to the client; and
Discussed with the client; and
Assessed to ensure the client is not disadvantaged by the conflict of interest.
Step 2: Assessing Conflicts of Interest
Conflicts may arise in a number of situations, for example:
Commissions / incentives paid by lenders which may influence your recommendation of lenders
and / or products which offer higher commissions and/or incentives.
Volume targets – lenders may give you a higher rate of commission for achieving certain volumes of
sales.
Other non-monetary incentives which may influence your recommendations.
Clients not being offered an adequate selection of products.
A client may be disadvantaged by such conflicts if they are directed to a specific product / loan which
are unsuitable for them.
Step 3: Mitigating and managing conflicts of interest
You must ensure conflicts are managed and clients are not disadvantaged. Action to mitigate and
manage conflicts may include:
Having a suitably comprehensive and competitive product list which should be thoroughly researched
and reasonably representative of the products available in the market.
PFB has thoroughly researched your Aggregator’s panel lenders and the products available to you.
Match product features to the client’s requirements and objectives.
Disclose all commissions associated with the products.
Undertake a product comparison (features, costs, fees, commissions) and demonstrate how they
meet the client’s requirements, objectives and financial situation.
Demonstrate the client will not be disadvantaged by the proposed product(s) being considered.
Allow the client to make the choice of which credit products to apply for, regardless of your
recommendation.
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Step 4: Document Recommendations
In order to demonstrate that you have met your obligations:
You should document your recommendation, including outlining the benefits of the product to the
client’s circumstances that outweigh the potential conflict which led to the recommendation (not
unsuitable) and/or disclosing commission/targets/ etc.
It would also be beneficial to have the client acknowledge that you have done this (via signing the
PFB Fact Find Preliminary Assessment).
Conflicts of Interest Table
The table below provides examples of conflicts of interest
that may arise and the actions which must be taken in
each case:- Example
Volume targets.
If a credit provider pays a higher rate of commission for
achieving certain volumes of sales.
Lender competitions/promotions.
If a credit provider runs a promotion offering prizes or
entries into prize draws for the submission and/or
settlement of loans.
Doing business with related parties.
If a broker and a staff member from a particular credit
provider are related.
Conflict Management
You should not favour the achievement of
volume targets over the interests of the client.
Arrangements to ensure this could include
compliance procedures designed to ensure
that there is no suggestion or recommendation
of a credit contract that is unsuitable for the
client, and full disclosure to and discussion with
the client regarding the conflict.
You should not favour the lodgment and
settlement of loans to achieve financial and/or
non financial benefits over the interests of the
client. Arrangements to ensure this could
include compliance procedures designed to
ensure that there is no suggestion or
recommendation of a credit contract that is
unsuitable for the client, and full disclosure to
and discussion with the client regarding the
conflict.
You should not favour the lodgment and
settlement of loans due to your relationships
over the interests of the client. Arrangements to
ensure this could include compliance
procedures designed to ensure that there is no
suggestion or recommendation of a credit
contract that is unsuitable for the client, and full
disclosure to and discussion with the client
regarding the conflict