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The major bank has revised its lending policy in accordance with provisions outlined under the new Banking Code of Practice.
NAB has implemented changes to the co-borrower and guarantor loan application process, in order to comply with requirements outlined under the new Banking Code of Practice, which is set to take effect from Monday, 1 July.
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Effective from 17 June, the following changes will apply:
Co-borrower arrangements
Brokers have been informed that before proceeding with a co-borrower loan application, they will be required to:
- determine whether the co-borrower will receive a “substantial benefit” of at least 25 per cent from the loan
- understand the reasons why they want to be a co-borrower
- ensure they understand the risks associated with entering into the loan, and that they understand the difference between being a co-borrower and a guarantor
- be satisfied that they are not experiencing any financial abuse
NAB told brokers that the Compliance Tab within ApplyOnline will be updated to reflect these changes for all applications involving more than one borrower, with the responses to be included in the Broker Interview Guide.
The bank added that where all applicants are not receiving a minimum of 25 per cent or equal share, brokers will be required to follow an exception process.
A new Co-borrower Acknowledgement form will appear in ApplyOnline and will need to be completed by the applicant. The form outlines the risks associated with entering into the loan and the difference between being a co-borrower compared to a guarantor.
Brokers will also be required to complete a Financial Abuse Declaration form, which will also appear in the Compliance Tab.
Guarantor arrangements
NAB has also announced that for all applications involving a guarantor, brokers will be required to:
- provide a copy of the Becoming a Guarantor information document, which must be provided to any potential guarantors identified in the interview process
- complete a Guarantor Suitability Assessment for each guarantor before commencing an application
Reflecting on the changes, NAB stated: “By complying with the [banking code], we are ensuring that our customers are fully informed about their transactions, are treated respectfully and fairly, and have the benefit of credit processes that support responsible lending practices.”
The Australian Securities and Investments Commission (ASIC) approved the Australian Banking Association’s new code in August 2018, following a prolonged dispute over certain terms within the code, which came to light during the third round of hearings of the banking royal commission.
The code includes new rights and protection for customers, small businesses and guarantors while also including stronger compliance and enforcement arrangements.
[Related: BOQ revises home lending policy]
