Problem
Tom works as a mortgage broker for Aussie Homes Pty Ltd (AH). On 1 May 2021, Tom provides the following customer services at his office:
A. David signed his first home loan with AH on 1 Feb 2021 and has noticed that his credit provider (ABC Bank) has since started offering larger discounts to new consumers. David asks Tom whether they can contact ABC and offer him a more competitive interest rate. Tom contacts ABC Bank and arranges a discount for David. Tom then advises David that the ABC Bank has agreed to change his interest rate without making any other representations or suggestions.
B. Maria had been engaging with Tom for her first home loan since Nov 2020. After prolonged discussions, Tom recommended ABC Bank's Access Loan product to her on 30 Dec 2020. Maria decided to take some time to think about whether she would accept the recommendation provided by Tom or whether she would go direct to ABC Bank. Maria meet Tom today and accept the ABC Bank's loan.
C. Ben is a low-income earner who was worried he would not be able to afford his loan repayments if interest rates increase. Tom assessed Ben's situation and recommended a fixed rate loan at a similar rate to the 'lowest cost variable rate loans' available to Ben in Feb 2021. Ben accepted the fixed rate option recommended by Tom and Interest rates fell in Mar 2021. If Ben had taken out a variable rate loan, he would have saved a significant amount in interest. Ben meets Tom today alleging that he has breached the best interest duty under NCCPA.
D. Sarah meets Thomas, who works as a mortgage broker with Aussie Homes Pty Ltd (AH). Sarah works as a primary school teacher and needs a home loan of $400,000. Thomas guarantees without reservation that he will get the loan approved from XBC Bank with whom Thomas enjoys a good rapport. Also, XBC Bank offers a higher rate of commission for mortgage brokers over its competitors. AH has upgraded their platform software with a new algorithm that prioritises loans offered XBC Bank when brokers sort available products.
Sarah and Thomas discuss her monthly income and expenses. Thomas voice record their conversation to comply with his record keeping obligations. During the discussion, Sarah states that she is earning $8,500/per month and got no liabilities other than a payment of $1,000/per month to her ex-husband as child maintenance payments for their seven-year old son. Thomas provides details of the range of potential products that would meet Sarah's needs including loans that are packaged with credit cards (from XBC Bank). Thomas learns that Sarah does not currently have a credit card and has no history of credit card debt. Further inquiries reveal that Sarah does not think that taking out a credit card is essential since she has a minimal lifestyle. Thomas says Sarah can meet her living expenses with the credit card, and her salary will be offset against the home loan balance during the interest-free period on the card. Thomas says this package could help Sarah 'save years' on her home loan. However, Thomas does not mention that if Sarah fails to repay the amount outstanding on the credit card in full each month, she will be liable for interest on that amount at a high interest rate (i.e. higher than the interest rate on her home loan). Thomas provides the following options to Sarah with the specific recommendation to accept XBC Bank's Access Loan:
a) Access Loan from XBC Bank packaged with credit card.
b) Advantage Loan from XYZ Bank packaged with offset account and no credit card.
c) Advantage Loan from UNO Bank without offset and credit card facility.
Advise:
a) Whether National Consumer Credit Protection Act (NCCPA)/National Credit Code (NCC) provisions are applicable in the given case scenario?
b) Whether Aussie Homes Pty Ltd has complied with their obligations under National Consumer Credit Protection Act (NCCPA) while entering the loan agreement?