How Docusign helps lenders meet BCCC recommendations around lending guarantor workflows

As every lender would know, guarantors are the lifeline some borrowers need to buy their first house. Yet there are big risks involved. Particularly, the fact that a guarantor has to pay back the entire loan if the borrower can’t, which may see them having to remortgage or sell their own property. 

Given risks like these – which can shatter family relationships – guarantor lending has been in the spotlight lately. In fact, a 2021 Banking Code Compliance Committee (BCCC) report found that banks were failing to uphold lending guarantor obligations set down in the Banking Code of Practice. The report found that lenders:

• Were failing to meet pre-guarantee disclosure obligations – so, they weren’t giving guarantors the complete picture about the risks involved in becoming a guarantor

• Lacked an audit trail of communication – so, they couldn’t prove how or when the gave guarantors key information about the loan

• Lacked the ability to gather data relating to a guarantee – information was stored in paper files in branches or storage facilities, in individual customer files, or using different systems for subsidiary brands and businesses 

In other words, while lenders must make sure people can make ‘fully informed decisions’ before signing up to become a guarantor, many weren’t. 

So the watchdog went on to recommend sweeping changes to the practice of approving guarantors – from record keeping to processes and technology. And now, two years later, it is holding lenders to account by doing a follow-up survey to see whether they are following the report’s recommendations.

Using Docusign to comply 

With all this scrutiny around lending guarantor workflows, lenders large and small are looking for better ways to tick off on the recommendations made by the BCCC. And many are turning to Docusign. Let’s look at three ways that Docusign helps keep you compliant.

1. Delayed routing

Delayed routing is a simple feature within Docusign that ensures a three-day wait period is enforced before a guarantor can sign the loan documents. During this time, the guarantor can fully consider their obligations, sit on the information and seek legal advice. 

By adding delayed routing, there’s no room for error. The guarantor will receive the envelope and can open it, but they cannot sign until those three days have passed. And, for the lender, there’s an audit trail to prove that the wait period actually occurred, with all the timings captured in the Certificate of Completion. 

2. Inclusion of pre-guarantee disclosures 

The loan agreement can be set up in Docusign to ensure that any pre-guarantee disclosure documents must be read before a guarantor can sign. By configuring the agreement to enforce the guarantor to physically scroll through the disclosure documents – and by automatically capturing this action in the audit trail of the signing process – lenders have court-admissable evidence to prove that they are meeting pre-guarantee disclosure requirements. 

3. Central record keeping

Record keeping and document storage is made easy with Docusign’s central repository and document extraction methods. So, regardless of where lenders within your business are located, they can all access the same documents online. 

Following in the big banks’ footsteps

Generally, the big banks have adapted their processes to fall into line with the BCCC recommendations. And, not only does it mean they adhere with the rules, but by changing their processes they also reap other business benefits. 

For example, the Commonwealth Bank of Australia (CBA) uses Docusign to streamline lending. It all started with the delivery of emergency loans during Covid, but now more of CBA’s customers are actively opting to apply and sign loan agreements digitally.

Tim Roberts, Executive Manager Digitisation of CBA’s commercial lending business said, “Some of our commercial lending deals involve 20 different documents. There might be five or six different envelopes that need sending to different combinations of borrowers and guarantors. It’s a complex process that could take considerable time, now it takes just hours with Docusign,” Tim explains.

Now, it’s time for smaller banks and non-bank lenders to do the same. And the good news? With Docusign, it becomes easy to bring the complexity around guarantor workflows into scope. Tools like delayed routing are quick and easy to set up; and the guarantor documentation can even be contained within the same envelope as the rest of the loan application, with document visibility ensuring the guarantor only sees the pages that apply to them.

This simple change could ensure that your lending business complies with the rules around lending guarantor workflows. To learn more, get in touch with Docusign’s sales team.