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ASIC has been urged to enshrine “strong, consumer-focused” requirements for brokers in its responsible lending guidance.
In its response to the Australian Securities and Investments Commission’s (ASIC) request for consultation regarding its push to update its responsible lending guidelines (RG 20), consumer group CHOICE has submitted that the regulator explicitly prescribe measures within its guidance for mortgage brokers.
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CHOICE pointed to research from ASIC’s review of interest-only home loans in 2016, which reported that mortgage broking record-keeping from verification enquiries was “inconsistent” and in some cases, “fragmented and incomplete”.
Despite recent reforms from the Combined Industry Forum (CIF), which restrict the payment of commission to the loan amount drawn down by a borrower, the consumer group alleged that the supposed lack of record-keeping was “particularly harmful for consumers” because “brokers are currently incentivised to sell loans that will provide them with the largest commission”.
“Their interests continue to be aligned with the lenders, not their customers,” CHOICE asserted.
Therefore, the group said that it supports measures to “ensure mortgage brokers comply with responsible lending laws”, which include:
- providing specific guidance on loan products and features
- ensuring all questions are answered
- keeping all information in one place
- focusing on the consumer’s underlying objectives
- having documented processes where objectives conflict
- including a concise narrative summary
- providing a summary statement to the consumer
- ensuring the consumer understands the products and features
- ensuring the consumer knows that they must do
“These are strong, consumer-focused recommendations and should be codified in RG 209. Brokers and lenders alike should be required to adhere to them,” CHOICE claimed.
“This will ensure that the consumers’ interests, not the credit providers’, are prioritised.”
Broking industry stakeholders have also submitted recommendations to the corporate regulator, with industry associations and aggregators alike calling for greater clarity in ASIC’s guidance.
However, unlike CHOICE, broking industry stakeholders have called for the revised requirements to explicitly apply to credit providers.
ASIC will host public hearings in August to further consult on its proposed changes, with stakeholders invited to participate in the hearings to be drawn from the groups or individuals who provided a written submission to ASIC in the first round of consultation.
The hearings will be held in Sydney and Melbourne.
[Related: Aggregators call for new approaches to responsible lending]
