Gimmie’s Design and Distribution Obligations

Pt 7.8A of the Corporations Act 2001

The design and distribution obligations contained in Pt 7.8A of the Corporations Act 2001 are intended to help consumers obtain appropriate financial products by requiring issuers and distributors to have a consumer-centric approach to the design and distribution of products. In particular:

• issuers must design financial products that are likely to be consistent with the likely objectives, financial situation and needs of the consumers for whom they are intended;
• issuers and distributors must take ‘reasonable steps’ that are reasonably likely to result in financial products reaching consumers in the target market defined by the issuer; and
• issuers must monitor consumer outcomes and review products to ensure that consumers are receiving products that are likely to be consistent with their likely objectives, financial situation and needs.

The design and distribution obligations require issuers and distributors to develop and maintain effective product governance arrangements across the life cycle of financial products. This will result in improved outcomes for consumers of these products.

The following information is intended to satisfy Gimmie’s Design and Distribution Obligations.

Target Market Determination (TMD)

Gimmie must describe the class of consumers that comprises the target market for the product (target market) (see s994B(5)(b) and RG 274.67–RG 274.94);

A description of the likely objectives, financial situation and needs of consumers in the target market (see RG 274.70–RG 274.75).

Likely Objectives

• To purchase whitegoods, technology, furniture, appliances, and household items without bearing the financial burden of paying the outright price in a single transaction.
• An objective may be where a consumer is trying to avoid a traditional, ongoing credit facility such as a credit card, where annual fees and varying repayments may impact budgeting.
• Consumers may be moving away from the traditional rental or rent-to-own finance product and looking for a somewhat similar solution but are interested in owning the product.
• Consumers may be seeking a simple, non-interest-based payment arrangement where charges are capped and identified upfront.

Financial Situation

• The target market financial situation covers a range of socioeconomic brackets.
• The financial situation of the target market includes customers receiving any form of income and are financially capable to meet their current debt obligations.
• Customers do not necessarily need to be employed to be within the target market of the product.
• Consumers within the target market must meet conditions and restrictions relating to the suitability of the financial product including the consumers’ ability to afford the plan payments, satisfy responsible lending guidelines and demonstrate a reasonable credit history.
• The target market excludes customers who are currently under a bankruptcy agreement and have not been discharged. The target market also excludes customers who hold an Equifax credit score of 325 or less at the time of applying for the product

Needs of Consumer

• Customers who need a genuine cashflow solution product to assist them to improve quality of life and reduce financial burned of the upfront cost of whitegoods, technology, furniture, appliances and household items.

The following is a description of the product, including its key attributes (see RG 274.76–RG 274.78);

• The product is a buy now, pay later cashflow solution that enables consumers to purchase and own whitegoods, technology, furniture, appliances and/or household items upfront, whilst selecting to make weekly, fortnightly, or monthly repayments over 1 or 2 years. The repayment includes a plan fee attached to each repayment which is determined at a specified and fixed rate based on the individual Equifax Credit Score at the time of applying. These payments remained fixed for the life of the loan.
• The product includes an option to pay out the balance of the debt within 90 days and no plan fees will be charged. The product is subject to responsible lending guidelines as obligated under its Australian Credit License. More specifically, we determine whether a person within the target market has affordability for the new loan.
• A credit check is also conducted to gauge the consumer historical tendencies to repay debts. There are specific eligibility criteria, including customers over the age of 18, being an Australian resident, and not holding an active bankruptcy agreement.

The following is an explanation of why the product, including its key attributes, is likely to be consistent with the likely objectives, financial situation and needs of consumers in the target market. This will require the issuer to have critically assessed and tested its product (see RG 274.87–RG 274.94).

• The product is likely to be consistent with the objectives, financial situation and needs of consumers as the product provides a payment method that removes upfront financial burdens of the outright purchase of purchase whitegoods, technology, furniture, appliances and/or household items. It provides a cash flow solution that allows consumers to accurately budget for and forecast repayments.
• The product is suitable for the financial situation of the target market by allowing customers with income to be approved within the responsible lending guidelines.
• Customers who are bankrupt are excluded from the target market as responsible lending guidelines do not allow further debt to be given to consumers under a bankruptcy agreement.

Further, the issuer must describe the target market with objective, tangible parameters and with sufficient granularity.

 

Parameters

Parameter	Included	Excluded
Income	Any form of income being received	No current income
Age	18 years old and over	Under 18 years old
Debt Position/Ratio	No limits to inclusion	Consumers subject to a bankruptcy agreement
Employment Status	Any employment status	No exclusions on employment status
Residency Status	Must be Australian Resident or Permanent Resident	Anything else is excluded

 

An issuer will need to critically assess that the product, including its key attributes, is likely to be consistent with the likely objectives, financial situation and needs of consumers in the identified target market, in order to satisfy the appropriateness requirements when preparing a TMD.

Purpose

What is the purpose of the product?

The purpose of the product is to provide a cashflow solution for larger purchases of whitegoods, technology, furniture, appliances and/or household items without consumers bearing the financial burden of paying the outright price in a single transaction.

Is it fit for purpose?

The product is fit for purpose due to the flexibility of the consumer term selection and payment frequency. Furthermore, fixed payments allow for a true cashflow solution for customers using the product for budgeting purposes

Does the product (including its key attributes) fulfil a well-founded need for consumers in the target market?

There is a well-founded need for the product, as there is a lack of responsible financial products that are reasonably priced, and which ensure consumers can afford to make the repayments to which they are committed. Other products also carry high interest rates or trap consumers with a variety of fees and charges that may not be clear to the consumer.

Does the product include features or attributes that are inconsistent with the objectives, financial situation or needs of consumers in the target market?

There are no identifiable features of the product, which is not consistent with the objectives, financial situation or needs of consumers in the target market.

Does the product (including its key attributes) benefit the consumers in the target market?

The product and its key attributes benefit the consumers in the target market.

Past Outcomes

Has the product (including its key attributes) resulted in good outcomes for consumers in the target market in the past?

The product has resulted in good results for the target market in the past.

Did it deliver what was promised?

The product has delivered on its design purpose.

Who has benefited from this product or this type of product in the past?

Beneficiaries of this product are consistent with those in the target market.

Did the product meet the needs of those to whom it was distributed?

The product is meeting the needs of those target market it is being distributed to.

What does the data show were the ongoing benefits, risks and outcomes for consumers?

The primary ongoing benefit to the consumer is being shown to be the ability to use fixed repayments to manage and budget cashflows. Risks for consumers may include changes to their financial circumstances that affect their ability to make scheduled payments. Outcomes for consumers are generally positive, as feedback typically mentions happiness with the product and consumer enthusiasm to continue using the product.

Likely Future Outcomes

How is the product likely to perform in the hands of the consumers in the target market?

Based on the initial reaction and outcomes of the product in the market, the product is likely to continue to succeed and grow organically within the target market.

Is the product likely to deliver what is promised?

The product is very likely to delivery what is promised.

Refinement of target market and/or product

Does the product need to be redesigned or changed to be suitable for consumers in the target market?

There is opportunity for the product to be redesigned or changed however there is currently no need for the product to be changed to remain suitable for the target market.

Does the target market need to be narrowed?

The target market currently does not need to be narrowed. It may need to be narrowed if the product begins to deliver a different outcome.

Gimmie must specify any conditions and restrictions on distribution (distribution conditions) (see s994B(5)(c) and RG 274.95–RG 274.99).

To ensure that distribution of the product is directed towards consumers in the target market, the issuer must specify the following in its TMD:

• appropriate conditions and restrictions on distribution of the financial product (distribution conditions);

Consumers within the target market must meet conditions and restrictions relating to the suitability of the financial product including the consumers’ ability to afford the plan payments, satisfy responsible lending guidelines and demonstrate a reasonable credit history.

Why these distribution conditions and restrictions will make it more likely that the consumers who acquire the product are in the target market.

These distribution conditions will allow the distributor (Gimmie) to ensure that only consumers with the financial capacity to afford the product and for whom it is suitable are selected.

Distribution conditions should be specified in the TMD with tangible parameters so that these conditions are objectively clear (e.g., restricted to branch sales or through a dedicated customer contact centre). This clarity will assist distributors in complying with those conditions as part of distributors’ reasonable steps obligation.

The distributor (Gimmie) operates solely as an online retailer. Customers are screened for appropriateness based on the information provided when the finance application is completed.

As part of meeting the appropriateness requirements in s994B(8)(a), the TMD must explain why the distribution conditions will make it likely that the consumers who acquire the product are in the target market.

The distribution conditions will convey the transparent risk-based pricing (determined by capacity and subject to responsible lending criteria) designed for the target market. Furthermore, the geo-targeted above the line media ensures distribution channels align with viewing locations of consumers within our target market.

Finally, advertising material will promote our highest pricing (maximum weekly repayment amount) to align with minimum requirements for customer eligibility and to avoid misrepresentation.

A TMD must specify events and circumstances that would reasonably suggest the TMD is no longer appropriate (review triggers) (see s994B(5)(d) and RG 274.102–RG 274.107). They are a prompt to stop distributing the financial product (and direct the issuer’s distributors to stop distributing) until the TMD is reviewed.

In any case, issuers should include events and circumstances that would reasonably suggest that:

• the product, including its key attributes, is no longer consistent with the likely objectives, financial situation and needs of consumers in the target market

Such circumstances may include material changes to the product, an increase in market items which may increase the target market or an increase in the advertising and marketing activity which may push the product outside the target market. If any of these circumstances arise, the TMD will be reviewed.

Another circumstance may include the change of consumer data providers, such as a credit bureau. This may materially change the target market criteria due to provider data interpretation.

• the distribution conditions do not make it likely that the consumers who acquire the product are in the target market.

It is unlikely the distribution conditions would change to target consumers outside of the target market, however an increase in volume may draw consumers into the product from outside the target market. If data indicates the consumers finding our product, the TMD will be reviewed.

• an event or circumstance that would materially change a factor taken into account in making the TMD for the product

Such events may include the redesign of the product where data indicates a change is required to meet internal or regulated performance measures or economic circumstances which create consumer demand for the product in which consumers outside the target market begin to use the product.

• whether the product is being distributed and purchased as envisaged by its TMD

Continual analysis will be performed to ensure the product is being distributed to the target market. In any instance where it is found consumers outside the target market are using the product, this will trigger a review.

• the nature and extent of any feedback received from those who distribute or acquire the product.

There have been multiple Facebook and Google reviews that have come from consumers within the target market. The feedback expresses a positive user experience and satisfaction with the product.

We would expect an issuer’s TMD to include a review trigger relating to the occurrence of a significant dealing.

A review will be triggered at the occurrence of a significant dealing.

The requirement to specify reasonable review periods

Continual analysis will be performed to ensure the product is being distributed to the target market.

Annual reviews will be undertaken at the end of each financial year, starting with FY 2021-2022.

The review period is subject to change where the issuer materially changes the product, or during a review triggered by an event or circumstance.

Requirement to specify the information that must be reported by distributors.

The issuer must specify in the TMD the kinds of information from distributors needed to enable the issuer to identify promptly when a TMD may no longer be appropriate, whether due to the occurrence of a review trigger or another event or circumstance that would reasonably suggest this is the case: see s994B(5)(h). The information collected from distributors must be information that is relevant and necessary for this purpose.

The issuer is currently the only distributor of the product.

Requirement to specify when the distributor should provide the issuer with information about complaints

The issuer must also specify in the TMD the reporting period in relation to information the distributor must provide to the issuer about the number of complaints about the financial product.

The issuer is currently the only distributor of the product.

Complaints are recorded by the distributor in real-time as they occur. The distributor has access to the complaint register where all information regarding complaints is held, including the volume and substance of the complaint. This is reviewed internally by the compliance and risk manager of the distributor.

Complaints are responded to within 24 hours, and the volume over time is monitored consistently to ensure the product remains appropriate for the target market.

Making the TMD publicly available

A TMD must be made publicly available before any person distributes a financial product that is subject to the design and distribution obligations: see s994B(2). This applies to new products the issuer offers, and existing products that continue to be offered after the design and distribution obligations commence.

The TMD is publicly available on the Gimmie website, free of charge.