ACL Internal Systems Requriements

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Risk management systems

This requires you to identify any risks that you may face and ensure that you have measures in place to keep these risks to an acceptable minimum.

They should:

  • Follow a structured and systematic process.
  • Take into account your obligations under the National Credit Act.
  • Identify and evaluate risks, focus should be on risks that adversely affect consumer or market integrity.
  • Design controls to manage or mitigate those risks.

The controls must be fully Implemented and monitored to ensure they are effective.

Financial risk should also be addressed to ensure that your financial resources remain adequate.

Key ASIC reference: Regulatory guide 205: Credit licensing: General conduct obligations Section D

Conflicts of interest

As a credit licensee, you have a general conduct obligation that adequate arrangements are implemented to ensure your clients are not disadvantaged by any conflict of interest that may arise either wholly or partly in relation to credit activities that you or your representatives engage in.

This obligation may arise for example where an interest of the licensee conflicts with a legal obligation that the licensee owes to the client.


Example: Commissions payable on loans  

For example, if a credit provider pays a higher rate of commission to a licensee for achieving volume targets, the licensee must adopt adequate arrangements to ensure their customers are not disadvantaged by the possible conflict of interest that arises.
 


Licensees who provide credit assistance in relation to third party loans should have a well researched and comprehensive product list representative of the products on the market (being the market available to your clients).


Example: Mortgage broker

A mortgage broker has reviewed the home loan market and has a comprehensive list of the products on which it can advise and arrange, which is well researched so that it is representative of the credit market available to its clients.

The broker can offer borrowers access to products that will be competitive in price, although not necessarily the cheapest available. The list needs to be sufficiently comprehensive to ensure that the broker has made adequate arrangements, covering the various product options available on the market.

 

 

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