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Income and expense verification: what you need to know

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Income and expense verification: what you need to know

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March 15, 2018 11:41am | ASIC News | CompliFast Team

'What do I need to be doing to verify my client’s financial situation?' This is a common question that our team at QED Receive.

When it comes to income verification, its fairly straightforward -  payslips are an excellent way to verify income, but make sure you are also verifying the details in the payslips. Bank statements may be a good reflection of income being received, but keep in mind that they are just a snapshot from a point in time and carry other risks with their use. Then there are other options such as Tax returns or group certificates.

If your client is self-employed, you may focus more on alt-doc verification such as an accountant’s statement of income. The important point is that you have made a reasonable effort to demonstrate the client’s income.

 

Where many brokers stumble, however, is in the space of expense verification. At an absolute minimum, you should be collecting your client’s expenses in a breakdown across multiple categories as opposed to a single ‘total’ figure, and then comparing this to a benchmark. Your only ‘real’ alternative would be to complete a full budget analysis, with bank statements as supporting evidence.

 

In order to assist you with using benchmark figures to verify your client’s financial situation, we have developed an expense verification tool you can use to demonstrate that you have actively considered your clients’ expenses and taken appropriate action to ensure that. The tool even prompts you when you should be using another method to verify client expenses, such as bank statements. The tool is available now under CompliFast Broker Tools.

 

A final qualifier; If you are reading this as a Credit Representative, then you need to follow the direction of your Licensee’s responsible lending policy. If you want, feel free to have your Licensee give us a call and we can have a chat. Alternatively, if you want to be able to set your own credit policy, maybe have a chat with us about credit licensing.

 

For these matters or anything else, feel free to give the CompliFast team a call on 1300 817 662.

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