Making reasonable inquiries – Know your client (fact find)
      The responsible lending obligations under the NCCP Act require you to:

• Make reasonable inquiries about the consumer’s financial situation, requirements and objectives;
• Take reasonable steps to verify the consumers financial situation; and
• Make preliminary assessment (for credit assistance providers such as brokers) or a final assessment (for credit providers such as lenders) as to whether the credit contract or consumer lease is ‘not unsuitable’ for the consumer based on the information from the first two steps.

You are not required to undertake every avenue of inquiry to determine a consumer’s financial position – you are only required to make ‘reasonable inquiries’. The level of inquiries required will depend on the particular circumstances and the nature of the services provided to consumers (ASIC calls this ‘scalability).

To illustrate the scalability of reasonable inquiries, ASIC have suggested that the inquires expected to be made for a more basic credit contract (for example, a small personal loan) will be less detailed than those required for a mortgage. Further, a greater level of inquiry is necessary for debt consolidation and refinancing.

You should ensure that you have specific processes in place to ensure that the appropriate reasonable inquiries are made and that all information collected is recorded for future reference.

A template Fact Find and assessment document is provided on our web site. This template must be adopted in full, if you do not submit it on one of your own.

Reasonable inquires about client objectives

Reasonable inquiries must be made about a consumer’s requirements and objectives so that you may match these to the features and benefits of any credit contract you recommended.

Depending upon circumstances, the types of inquires you may undertake could include:

• The purpose for which the credit is required;
• The amount of credit or maximum amount of credit sought;
• The time frame for which the credit is provided;
• Whether the consumer seeks any particular features or flexibility and understands the costs and risks of those features;
• If the loan is to purchase a specific item, the term of the loan relative to the useful life of the asset.

More inquiries may be necessary where it is evident that;

• The consumer has limited capacity to understand the credit contract;
• The consumer has conflicting objectives;
• The consumer is confused about their objectives
• The consumer has difficulty articulating their objectives;
• There is a mismatch between the consumer’s objectives and the product being considered by the consumer.

Reasonable inquires about the financial situation of the client

Reasonable inquires must be made about a consumers financial situation so as to determine their ability to meet all the repayments, fees, charges, and transaction costs associated with the credit contract or consumer lease.
These inquiries could include:

• Amount and source of income (full-time, part-time , casual, etc)
• Consumers fixed expenses;
• Consumers variable expenses;
• Credit contracts to be repaid from credit advanced;
• Credit history
• Maximum amount repaid under the loan (including all fees);
• Consumers particular circumstances (age, number of dependants);
• Consumers assets (nature and value); and
• Geographical factors (remoteness).