Qualifying buyers : the thin line we walk
As a commissioned sales person myself (yes, no settlement, no income) I don’t for one moment envy the role of the sales brokers in the accommodation industry.
It’s a tough job with rewards that I hope compensate for the hard yards that people have to go through to get a sale. Dealing with the emotional roller-coaster that so often accompanies an offer must surely lead some to wish that they had studied psychology rather than sales and marketing.
If I were an agent I’d do all I could to ensure my buyer was able to do what they said they could and also to make them as comfortable as possible with their decision.
Obviously the first part of that process is to qualify the buyer in terms of purchasing power and for some agents that’s where the potential trouble can start. Asking a buyer how much they have and a bit about their financial position is fine but the minute an agent starts talking about bank lending guidelines, possible finance approval amounts and terms, interest rates or anything else to do with finance and borrowing they potentially create a risk for themselves.
The Australian Securities and Investments Commission has signaled that it is going to start taking a closer look at licensed sales agents who stray into financial services and credit advice. In order to act in any capacity in terms of providing consumers with advice or information relating to borrowing an individual or company must have an ASIC regulated Australian credit license or be an approved credit representative of someone who hold such a license. They must also comply at all times with the National Consumer Credit Protection legislation. The penalties for failing to be licensed and providing any form of credit information, guidance or assistance are severe and make no mistake, best avoided.
Licensees must be qualified, carry appropriate professional indemnity insurance, maintain significant compliance records and belong to an approved dispute resolution scheme. Specific credit advice relating to specialised lending such as SMSF finance requires an additional layer of compliance and accreditation. Potentially, if you encourage a client to think about purchasing via a SMSF you should hold an Australia financial services license.
So here’s the thing. When, as a sales agent, you contemplate telling a buyer about bank credit policy, gearing limits, interest rates, how much they can borrow, bank guidelines or anything else remotely associated with the provision of credit guidance you are potentially acting as an unlicensed credit representative and as a result opening yourself up to risk.
Certainly if a buyer acts on your feedback in isolation to licensed advice and suffers loss or unrecoverable costs you stand the very real prospect of being sued by the client and investigated by the regulator.
As we go to print ASIC are investigating the practices of some agents in Sydney in relation to this kind of conduct with prosecutions expected in time. Admittedly the parties being investigated appear to be of the property spruiker/make a million via SMSF variety but none the less it is a sign of where ASIC is going in terms of sales agent compliance.
We recently had an example of a borrower coming to us already seemingly well versed in all matters relating to finance. They’d had a great meeting with their well-meaning agent and but unfortunately, as a result, were armed with some out of date and inaccurate information. Had they gone to contract based on this information and incurred legal fees I suspect there would have been hell to pay once we made an assessment of the deal and gave them the bad news. Again, a rare case but certainly not one you would want to be involved in if things turned bad. In my experience most agents are consummate professionals with a very sound understanding of bank credit policy and the likelihood of getting a deal across the line. Doesn’t matter though, even if you give accurate advice you are still acting outside the law as it applies to credit licensing.
My advice is simple: Have a brief chat to your buyer, ascertain that they have a few bob to put in and get them in front of a licensed credit advisor or a bank pronto. Of course, as finance brokers we’d prefer the first option and as many of you will know nothing focuses the mind like commissioned sales. Your buyer can then get properly pre-qualified by a finance professional with the latest bank credit policies to hand and the most recent data to work off and you can avoid any risk of ASIC or your client having an issue with your conduct.
Lastly, while my observations are related to the thin line sales people walk my comments apply equally to any non-licensed advice, including credit specific advice provided by lawyers and accountants.
