The MFAA has made a submission to the federal government’s Department of Treasury seeking a resolution of the potential breach by brokers of NCCP because of the way some lenders treat loan variations.
The submission points out that, while some lenders treat loan variations as just that, others require a new loan contract.
MFAA CEO, Phil Naylor, says the problem that this creates for brokers is that, if a broker initiates a variation to the loan contract on behalf of a client, where the lender treats this as a new contract, NCCP requires the broker to go through the whole responsible lending obligations under the NCCP as if the variation was a new loan.
“This places the broker in no-man’s land, because at the time he or she commenced the variation process, the ultimate treatment by the lender is likely to be unknown. It is not appropriate for these functionally identical outcomes to trigger different responsible lending requirements,” says Naylor.
“Our solution in the submission is simply that the regulations should make it clear that if a variation , which does not involve an increase in the amount of the credit, should be regarded under NCCP as a variation irrespective of the lender’s treatment of the transaction. In this way the whole responsible lending obligations process will not be triggered.”