Advice For Lenders
Property & Conveyancing
Newcastle's Legal Experts In Financial Advice
Lending money or conducting a financial transaction can pose risks to all parties involved. For the lender in this transaction, it is important to take the necessary legal steps to reduce financial risk and protect your assets.
When lending, all agreements must be documented in accordance with the law to reflect the nature of the agreement to avoid a dispute. Financial disputes can fracture all types of relationships, be they business, friend or family. Ensuring that the agreement documents all terms agreed by the parties and are understood lessens the risk of a dispute arising in the future. A loan agreement should cover important details including interest rates, timeframe for payments, default provisions and if applicable, security for the loan.
How Burgess Thomson Can Help
Burgess Thomson’s team of exceptional solicitors can offer legal advice for lenders from the very beginning of the transaction process. We can assist our clients to make sure all responsible lending obligations are met and the correct documentation is acquired. Our legal team confidently support our clients to ensure that their interests are met and they are satisfied with the outcome.
Find out more about how we can help Buying Property.
What is the role of a lawyer in the lending/borrowing process?
When entering a transaction, your lawyer’s role is to protect your financial safety. They have your best legal interests in mind and prioritise your financial security by providing independent legal advice. They ensure all documentation, including the Lender’s standard charge/mortgage terms and the Title insurance statutory declaration are clearly outlined and recorded accurately.
What are the responsible lending obligations?
Credit licensees must comply with the responsible lending conduct obligations under the National Consumer Credit Protection Act 2009 (National Credit Act). There are obligations on the lenders’ behalf in place to minimise the financial risk for all parties involved. It is the responsibility of the lender to ensure the loan is suitable for the borrower.
The responsible lending obligations from ASIC involve:
- making reasonable inquiries about a consumer’s financial situation, and their requirements and objectives
- taking reasonable steps to verify a consumer’s financial situation
- making a preliminary assessment (if you are providing credit assistance) or final assessment (if you are the credit provider) about whether the credit contract is ‘not unsuitable’ for the consumer
- if a consumer requests it, being able to provide the consumer with a written copy of the preliminary assessment or final assessment.
What is the National Credit Code?
The National Credit Code (NCC) came into effect on 1 July 2010, and governs all credit contracts such as mortgages, guarantees and sale by instalments. The NCC deals with not only licensing requirements, but also responsible lending and comparison rates for mortgages and loans. The NCC requires credit providers to include a comparison rate when they advertise fixed-term credit for domestic purposes. It must include the interest rate as well as applicable fees and charges. Before entering the contract, the creditor must also give the consumer a pre-contractual statement as well as an information statement.
What disclosure documents do lenders have to provide?
Lenders will need to provide a credit guide, a quote, a proposal document, and a written assessment to the consumer before engaging in credit activities. These documents can be given to a borrower personally, if the borrower consents, can be sent electronically or made available for retrieval in an electronic format.
How has Covid-19 affected lenders?
The Australian Prudential Regulation Authority (APRA) announced an extension of its temporary capital treatment for bank loans on 8 July 2020. This means that lenders have the option of extending repayment deferrals for an additional four months for borrowers that require further assistance. However, an extension to a repayment deferral is not automatic and lenders will contact borrowers to determine what are the best options for their circumstances.