Assessment cover sheet
In order for your assessment to be marked you must complete and upload all tasks and this cover sheet via the AAMC Training Group portal. Your assessment tasks must be uploaded in an electronic format i.e. Word, Excel, PDF or Scan. A maximum of five (5) attachments (maximum 20MB each) can be uploaded for this assessment. Please see the step-by-step instructions in your Member Area on how to upload assessments.
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Task 1 Case Study
As part of managing your professional development and maintaining currency, you read many industry articles. You received this following article from Industry Media and decided it might be a good one for yourself and the other finance brokers (authorised credit representatives) of DNZ, in order to understand the industry better.
The historic low interest rate of 1.5% which remained the same after nearly two years, is expected to increase “at some point, according to Philip Lowe, Governor of the Reserve Bank of Australia (RBA). Economist Warwick McKibbin concurred stating that this has been shown by the local economic and political climate. The increase is predicted even in global standards as an effect of the rise of climate change policies, digital disruption, and the overall changing global economy.
Due to low inflation, lack of growth in wages, and job insecurity – the present interest rate has failed to catch up with the global interest rates. These in turn mean that household spending is not enough to push the economy forward.
While the RBA is able to influence most interest rates in the economy, and in turn manipulate the demand for borrowing, the banks are assumed to pass the cost on to borrowers. The banks endeavour to shoulder the costs of borrowing funds within their business before passing it on to borrowers via loan repayments.
As the RBA and banks determine the cash rate and interest rates, they do not solely govern the behaviour of the financial services industry.
While this is so, there is the call to prepare for the rate hikes. It is best for borrowers to sort out their finances ahead of time and be mindful of the industrys climate, so that they are aware of interest rate movements. If it is possible, park spare cash in an offset account or use it for paying down the loan.
News Article Resources used to obtain the above information can be found at the following websites:
· https://www.afr.com/news/economy/monetary-policy/prepare-australians-for-rate-hikes-now-mckibbin-tells-rba-20180622-h11qcy
· http://www.abc.net.au/news/2018-07-03/very-high-chance-of-an-interest-rate-rise-next-month/9935456
· https://www.realestate.com.au/advice/how-to-survive-an-interest-rate-hike/
Case Study questions:
1. You have asked the finance brokers (ACRs) in the DNZ business to consider the article above which will also help them to better explain to their clients and referrers about external impacts that may affect borrowing. Referring to the article above and the AAMC Training learner guide, identify a minimum of three external forces that could influence the move in interest rates and that also dictate the economic and political climate in relation to the financial services industry.
2. What are the two financial services sectors that are involved in influencing interest rate movements and how do they interrelate?
Task 2 Workplace Project
1. Paul has asked you to write a staff memo to update everyone on the recent changes and impact of the Australian Financial Complaints Authority (AFCA) on organisational policy, guidelines and procedures.
Using the template below and considering the key points, write the office memo in less than 500 of your own words*.
Refer to the AFCA website https://www.afca.org.au/members to locate relevant information found under Members.
*MUST BE IN YOUR OWN WORDS
Dear colleagues,
ABOUT AFCA
*Who are AFCA and what are the benefits of AFCA membership?
LETTING YOUR CUSTOMERS KNOW
*What are the key points that you have to consider in communicating information about AFCA?
*What does the AFCA Code Compliance and monitoring team support and administer? (Found under Codes of Practice)
2. Paul Williams has asked you to update the DNZ Credit Guide with the correct wording about AFCA. What information should be available to consumers on both the website and in the credit guide? Reference: Letting your customers know about AFCA.
Task 3 Short Answers/Activity
Read the following article and answer the relevant questions.
Positive credit reporting is now mandatory in Australia but what does that actually mean?
The Government announced on 2 November 2017 that it would legislate for a mandatory comprehensive credit reporting regime. As of 1 July 2018, recording positive credit information on credit histories was made mandatory for all credit providers. This is intended to allow lenders to better assess risk using a fuller picture on potential borrowers credit history and could be beneficial for people who have the means to take on a loan but may have had a few blemishes in the past, such as one or two missed payments.
What is Negative Credit Reporting?
Negative credit reporting is the system Australia operated under until March 2014, which was based around only making a note of negative credit events. Lenders based their assessments of a potential borrower applicant solely on whether the applicant had any negative reports on their credit history, such as missed repayments or defaults.
Banks, credit unions and other lenders could access information concerning a potential customers credit applications but not whether the application was approved or not. The credit report also included details of any overdue debts, defaults, bankruptcy, or court judgements.
What is Comprehensive (Positive) Credit Reporting (CCR)?
Positive credit reporting is Australias new credit reporting system aimed at making it easier for lenders to form comprehensive and balanced assessments of applicants credit histories. The credit report includes information about current accounts held, what accounts have been opened and closed, the date default notices were paid and whether repayments were met.
While some may raise concerns over the increased amount of personal financial information being given to banks, the comprehensive credit reporting system is largely seen as a positive step for consumers and lenders, encouraging responsible lending practices and enabling consumers to build a more comprehensive and positive credit report that could help them get a better deal from their chosen lender.
What does it mean for finance brokers?
With financial institutions providing a more complete picture of borrower behaviour, it becomes a very effective tool for brokers to have a lot of the initial discovery in a fraction of the time. More information means greater efficiency, which in turn can only be a good thing for loan book growth and client satisfaction.
Perhaps the most immediate and profound change will be around loan approval, largely because the broker and lenders are both working with similar data sets.
With positive reporting, the broker can work with the client to identify reparable financial behaviours that will ultimately improve their creditworthiness in time securing the loan or negotiating a better rate.
Not only can the relationship be maintained, but it can build the kind of trust that creates a lifelong client relationship.
Whilst there are many positives for finance broker under the new regime, there are some procedural changes that should be implemented including training for finance brokers (Credit representatives) and more comprehensive information for clients. Finance brokers will be required to make their clients more aware of the benefits and repercussions of their credit report through discussion and possible other information brochures/key fact sheets.
For those clients with an adverse credit history, the business will need to adopt a system where the brokers can implement a longer term strategy to guide the client to adopt better credit practices in improving their chances for a loan and the possibility of a better interest rate. By signing a privacy form, clients should have the ability to request the finance broker, as agent, to obtain their credit report before commencing to application with the lender.
Referenced from: https://www.canstar.com.au/credit-score/what-is-positive-credit-reporting/ and https://www.equifax.com.au/personal/articles/what-are-benefits-comprehensive-credit-reporting-consumers
Task 3 Questions:
Paul has asked you to review the above article and consider the ongoing changes to comprehensive credit reporting which is highly important information for staff and customers. He has also asked you to ensure staff knowledge across the article in relation to operational procedures and processes accurately reflect these changes. He has mentioned that linking to the Equifax website and other industry related information is a good way to remain up-to-date with ongoing changes. Also, there are many ways to let clients know more about CCR and changes see sample: https://www.inovayt.com.au/what-you-need-to-know-about-the-new-credit-reporting-laws-before-applying-for-a-home-loan/
1. What are the procedural implications of CCR on your organisations operations?
2. How might you stay up to date with changes in CCR or any other regulations?
3. What would be a good method and time frame for updating finance brokers (your staff) and clients regarding these changes? You may wish to place your answer in a table similar to the one below.
Who
How
By when
Task 4 Workplace project
Due to increased workloads, Paul has hired new broker, Shona, on a subcontract basis and she will undergo 24 months of mentoring. Shona was formerly a loan processor in her previous role and already holds an FNS40815 Certificate IV in Finance and Mortgage Broking qualification.
1. As an initial measure to implement a successful monitoring of the authorisation process, discuss with Shona the procedures a responsible manager has to undergo to authorise her as an Authorised Credit Representative (ACR) with ASIC. This process forms part of the agency agreement required under ASIC between Licensees and their authorised representatives. Using the table below, complete the process of authorisation
https://asic.gov.au/for-finance-professionals/credit-licensees/credit-representatives/
a. Undertake background checks on that representative.
b. Ensure that they are adequately trained to engage in credit activities.
c. Ensure that they have current external dispute resolution (EDR) scheme membership before the authorisation is given.
d. Provide written consent to the appointment.
e. Ensure they have adequate systems and procedures in place to monitor and supervise their representatives (see Monitoring and Supervising representatives ).
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Assessment name
Financial Services Legislation & Compliance Assessment
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