NCCP Act
What is the NCCP Act
The National Consumer Credit Protection Act or NCCP, is legislation that is designed to protect consumers & ensure ethical & professional standards in the finance industry, through the National Credit Code (NCC).
The Act is regulated & enforced by ASIC. The Act provides that all lenders & mortgage brokers are required to hold a credit license or be registered as an authorised credit representative.
The process of applying for a loan
When you apply for a loan with a mortgage broker, they will follow the specific process set out in the Act.
- Make enquiries: Your mortgage brokers must make reasonable enquiries as to your financial position, requirements & objectives.
- Verification: Your mortgage broker must take reasonable steps to verify your financial position.
- Preliminary assessment: With the information gathered from steps one and two, your broker must make a preliminary assessment as to which loan(s) are appropriate for you, before recommending them to you.
Can’t you just tell me which lender is best?
We frequently receive requests from people who want to know which lender they should apply with and what interest rate they will receive, before we have gone through the first two steps properly!
It simply isn’t possible for us to recommend a lender, without knowing your full situation and seeing your supporting documents. Without this information, we cannot give you accurate advice.
Additionally, it is against the NCCP Act for us to recommend a product without making proper enquiries and verifying your information.
There are literally hundreds of different credit policies which could potentially affect the outcome of your application, many of which are counter intuitive or have very little to do with common sense!
Imagine a builder trying to give you a quote to build a house; without actually actually seeing the plans. Applying for a home loan is a complicated process and if we do not complete a preliminary assessment then you risk having your loan declined or we may recommend an unsuitable loan.
Can you give me an indicative interest rate?
Yes, we can give you an indicative interest rate & details of likely lender fees. We normally give you a range, as we do not know which lenders you will qualify for a loan with.
Which home loans are regulated?
As a general rule, almost all home loan types & applications are regulated under the Act. The rules for this are complicated, however a loan is likely to be regulated if it meets the following conditions:
- The borrower is natural person; and
- The credit is provided wholly or predominately;
- For personal, domestic or household purposes; or
- To purchase, renovate of improve residential property for investment purposes; or
- To refinance credit that has been provided wholly or predominately to purchase, renovate or improve residential property for investment purposes; and
- A charge is made for providing the credit; and
- The credit provider provides the credit in the course of a business.
This means that most standard home loans are regulated under the Act. The main exceptions are:
- Loans in the name of a company (i.e. not to a “natural person”).
- Loans used predominantly to invest in commercial property, shares or a business.
There may be more flexible lending products available for these loan types, where no form of income verification is required. These are known as a no doc loan.
What does this mean for low doc loans?
Lenders and mortgage brokers are required to take reasonable steps to verify your financial position. This is at odds with the concept of a low doc loan where you do not need to provide evidence of your income. To get around this problem, lenders have come up with “alternative verification” methods.
By providing some documents as evidence of your income, lenders can fulfil their obligations under the NCCP Act, without requiring your tax returns.
The most common documents that lenders ask for are:
- BAS statements: A lender may ask for 12 months BAS statements to verify your turnover and estimate your income.
- Trading statements: A lender may ask for 6 months bank account statements from your business, to verify your turnover and estimate your income.
- Accountant’s letter: A lender may have a specific accountant’s letter template for your accountant to sign, confirming your income.
- Note: One of our low doc lenders has interpreted the NCCP Act in a different way to the other lenders. As a result, this lender does not require any income evidence, other than a signed Income Declaration Form!
The old style low doc loans where only an income declaration was required are effectively gone. The only exception to this are the unregulated loans available from specialist lenders.
Do no doc loans still exist?
No doc loans do not require any evidence of your income and in some cases do not require you to sign an income declaration. They do not meet the requirements of The NCCP Act and as such, are only available from a few select lenders who offer unregulated loans.
If your loan is regulated under the NCCP act (see above criteria) then you cannot apply for a no doc loan.
Customer feedback
We are committed to complying with all regulatory legislation and we endeavour to find our customers the best loan product available. We appreciate any comments, compliments or complaints you may have, that can help us improve our processes.
Please contact us on 1300 889 743 and direct your feedback as follows:
- Direct compliance or NCCP queries as well as complaints, to our Compliance Manager.
- Direct operational or process queries to our Operations Manager.
Find out more
If you would like to learn more about the NCCP Act and how it will affect your home loan application, please call 1300 889 743 or enquire online and one of our mortgage brokers will get back to you.
