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Jessica Darnbrough
AFG has slammed the West Australian government’s decision to introduce new identity verification regulations, arguing the new requirements will hinder competition in the mortgage market.
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From January 2 onwards, anyone who wishes to buy a property or a piece of land will have to verify their identity.
The regulations were passed earlier this year in a bid to reduce the opportunity for successful land title fraud as a result of identity theft or other improper dealings.
But AFG’s general manager for sales and operations, Mark Hewitt, believes the new rules will unnecessarily stifle competition between lenders by hurting Australia’s non-majors and non-banks.
In a letter to lands minister Brendan Grylls, Mr Hewitt said many second tier lenders currently outsource document production to lawyers, which can result in problems down the track.
“Our interpretation of the new procedures is that after the lawyer preparing the documents has received instructions to prepare mortgages, the lawyer must arrange for customer identification verification (CIV). The lawyer can outsource this activity, but at the lawyer’s risk (and initial advice to us is that such outsourcing may not be covered by their professional indemnity insurance). The additional costs for the lawyer’s time will be borne by the lender and ultimately the borrower,” he said.
“We are particularly concerned about the impact this will have on the second tier lenders (those not owned by the four major banks) and the resultant effect on competition to the ultimate detriment of borrowers.
“This comes at a time when the non-major sector is starting to find its feet again post-GFC and apply real competitive pressure to the major bank-owned brands. AFG takes its role as a conduit to competition very seriously and we fear the cost burden of the new identification procedures will hit the non-majors hard and reduce their ability to compete effectively. The end outcome will be borrowers paying more for their mortgages.”
According to Mr Hewitt, the government should look to introduce similar laws as those passed in Queensland and NSW.
“These states have passed laws requiring CIV of mortgagors,” he said.
“They permit this to occur as part of the normal AML/CTF identification by the mortgagee. From our point of view this system is working well, and together with other initiatives taken by our industry, the incidence of identity fraud has reduced greatly.”
But Mr Hewitt’s concerns have been dismissed by the West Australian government.
In a letter to Mr Hewitt, the WA registrar of titles Jean Villani said the practice was an important step forward for the state.
“This practice is an important step forward in protecting the community against title and mortgage fraud and other improper dealings in the WA land titles Register,” the letter read. “It improves the integrity of the VVA Torrens system. It also reduces the risk of successful claims for compensation against industry members and against the State of WA under the Transfer of Land Act 1893.”
