Banks should be obliged to provide a ‘not unsuitable’ assessment so that consumer credit applicants can check the information submitted prior to signing the contract.
This recommendation comes from the Independent Review of the Code of Banking Practice – also known as the Khoury Review after Phil Khoury, the head of governance advisory firm Cameron Ralph, who is heading up the review process.
Khoury recommends that the assessment be provided free of charge and as a matter of course so that the lending process is more transparent to consumers applying through the third party channel.
He wrote that customers often do not see information submitted by a broker on their behalf and so cannot validate this information as a result.
“To address this issue, the Joint Consumer submission suggested that the bank should be required to provide this information to the customer for checking.”
While the banks currently offer a ‘play back’ on all data required when making a ‘not unsuitable’ assessment to consumers, this does not necessarily contain the information submitted at the time of the application, Khoury found.
“To avoid creation of yet another disclosure standard, it seems to me that the best way for signatory banks to ‘play back’ information to a consumer credit customer is for the bank to provide the customer with the bank’s already obligatory ‘not unsuitable’ assessment.”
Currently, few requests for this document are made because consumers remain unaware of its existence and their right to request it, he said.
“The advantage of the ‘not unsuitable’ assessment is that the figures in this assessment of are at the end of the chain – after the customer’s input, the broker’s input and any further input from the bank itself.”
While the ‘play back’ in its present form is rather brief, a more “fulsome” document is not recommended, Khoury said, as this could slow down the lending process and provide a swathe of information which may not even be read.
“Given these concerns, I am not proposing that the Code require the ‘play back’ information to incorporate more detail than that necessary to meet legislative requirements.”
If banks provided additional information or initiated a discussion with consumers about these figures of their own accord, this could potentially reduce lending on the basis of incorrect information, he added.
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