Brokers beware credit repair referrals

by Adam Smith01 May 2012

A credit repairer has cautioned brokers against using the service for their clients, saying they could find themselves violating NCCP rules.

Oasis Finance Solutions’ Graham Reibelt has warned that brokers who refer clients to credit repair companies could risk putting clients in unsuitable loans. Reibelt said Oasis Finance Solutions briefly offered to take referrals from brokers, but quickly withdrew the service upon receiving legal advice.

Reibelt said credit repair would make it too difficult for a broker to accurately assess a client’s suitability for a loan product.

“To make a decision on one or a range of loan products, all known information about the client's true position and needs must be clearly identified as part of the assessment process. If a broker elects to arrange to have a client's credit history repaired and then not disclose that past history, then a key element will be missing from the assessment process, so any loan selection decision will be tainted,” Reibelt said.

The essence of credit repair, Reibelt said, was to ensure clients became eligible for credit they would not otherwise have been able to secure. Because of this, he cautioned that brokers and lenders should be wary of repairing clients’ credit.

“If the selected loan product would not have been one the client would previously have qualified for, then the broker and or the lender would have breached their obligations under the NCCP to find a product that was not unsuitable,” Reibelt said.

Disclosing credit repair may not be enough either, he suggested. While disclosure of the credit repair would be imperative, Reibelt said it would also defeat the purpose.

“The very essence of the NCCP is disclosure both to the client and to the lender; therefore, to avoid these issues the broker must disclose known information about their client's credit history to the lender. How else can the lender make an informed decision? Clearly by disclosing their client's adverse credit history it will negate any benefit the credit repair may have achieved,” he said.

Reibelt warned that, while there were no risks to credit repair companies taking referrals from brokers, considerable risks existed for the broker.

“The bottom line is brokers should not be referring clients to credit repair companies, the potential risks facing them are too great,” Reibelt said.

COMMENTS

  • by Michael R 1/05/2012 10:30:31 AM

    It all depends on the individual's circumstances. To withdraw this service is a knee jerk reaction. I had a client who failed to get credit because he was defaulted for not paying $1,200 at university 4 years earlier, which his last employer should have paid when they were a trainee working for them. But because my client left their employ, they refused to pay, the last payment. It took 3 weeks to pay the repair company, & the default. But in the end all was done, and the failure to pay was in no way a blemish on my client's ability to pay or character. To simply withdraw this type of service is ridiculous.

  • by John C 1/05/2012 10:45:11 AM

    I disagree with Graeme, in that there are so many instances of incorrectly recorded credit infringements listed on Veda and the other Credit Reference agencies, that this is not providing a true picture of the the clients credit position either. If a credit infringement is removed because a mistake has been made, then it should be removed, if there is no mistake than the infringement remains. This is nannystatism at its worst!

  • by Alan 1/05/2012 11:02:58 AM

    I agree, in the case of a default listed on the clients file where the issue is in dispute and this is resolved in the clients favour then this is not an indicator of poor credit worthiness of the client. i know of a particular client who had a dispute with Origin energy over an unpaid account after the client had moved on from a rental property, in the end origin just stopped corresponding with the client and defaulted them. the file of evience that this was a disputed amount was ober an inch thick but Origin just decided to default the client. this is not an indicator or a poor credit worthy client but an example of a utility provider who didnt want to accept that they were wrong.