‘Fee for Service’: Make sure you remain compliant

May 29th, 2017

For some businesses, particularly those that also offer other financial services in addition to credit assistance, a fee for service model may suit the way you choose to operate. Whilst most brokers at Connective do not charge a fee for service when providing credit assistance, there is nothing wrong with doing so as long as you ensure you have made full disclosure to the customer prior to doing the work, and that you always keep their best interests at the heart of everything you do.

Whatever fee model you decide to use, you need to ensure you are meeting your compliance obligations under the NCCP. This article outlines what you need to know if you choose to use a fee for service model.

Full disclosure and complete transparency are the most important factors.

The main objective of the National Consumer Credit Protection Act (NCCP) is the protection of consumers. However, upholding the requirements of NCCP not only protects the consumer, it also protects your reputation and the reputation of the industry as a whole.

If you decide you want to charge a fee for service in your business, the NCCP Act requires the up-front disclosure of your fees and charges to your customers through the use of disclosure documents. The requirements of these disclosure documents are simple:

• Any fees charged to a consumer should be fair and reasonable and fully disclosed.
• ‘Disclosure’ should consist of the amount you wish to charge the customer, the method of calculation, and the timing of when any fees and charges are payable.
• These details are required to be completed within a ‘Quote’.
• The total amount charged cannot exceed what has been disclosed within the Quote.

It’s important to remember that the ‘disclosure’ must be made in writing and must be signed and dated, then given to the client before you provide them with any credit assistance services. A Quote is the easiest way to provide this information to the client. So if you plan to charge a fee, before you provide your client with credit assistance, service or advice, you must:

• Complete a ‘Quote’ document and ensure it is signed and dated by you.
• Provide a signed copy of the Quote to your client.
• File a copy of the Quote in Mercury.

The Quote can be completed and signed between the time period of providing the Credit Guide at your initial discussion and providing the Credit Proposal Disclosure (loan recommendation). A standard Quote Document can be found in your Mercury Compliance Wizard along with your other compliance documentation templates.

What fees can you charge?

The fees you can charge your client are not defined by the NCCP. However, it does state that you should always ensure all fees payable by your client are ‘not excessive’. Please also ensure that they are relevant to the services provided and completely transparent. By ‘transparent’ we mean that the client should always know exactly what services you charge a fee to perform, and exactly what they can expect in return for the fees they pay you.

Whilst it is your business decision to charge your customers for credit assistance services, it is your reputation that will be adversely affected if you charge excessively and/or don’t deliver on the services you promise. If you decide to charge a fee for service, it is also very important to ensure that the quality and level of service you provide always meets your client’s expectations. Managing your client’s expectations is a big part of ensuring your client is happy to pay you a fee, and to ensuring you have an ongoing relationship with your client in future.

If you have any questions about charging a fee for your credit assistance services, please contact your Compliance Support Manager by clicking the Help icon in Mercury and then selecting Compliance from the menu. Alternatively, you can get in touch with us simply by emailing our Compliance Helpdesk directly at compliance@connective.com.au. We’ll be happy to help.