Login
ISCOVER
Brokers have been warned to expect a more aggressive ASIC this year, with the regulator already cracking down on two alleged fraudsters.
ASIC announced yesterday that an investigation had led to the arrest of two Melbourne men for an alleged mortgage fraud valued at about $110 million.
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
QED Risk Services director Greg Ashe told The Adviser that another legal case from late 2014 would give ASIC the confidence to be more aggressive this year.
The regulator updated its responsible lending guidelines in November after the Federal Court found a payday lender and funder guilty of breaching their compliance obligations.
ASIC said the case proved that brokers must "inquire about the consumer's current income and living expenses to comply with the responsible lending obligations".
Mr Ashe said that was how ASIC had always interpreted the regulation but that the exact legal position had been uncertain until now.
"I think we will start to see a focus on the average broker, with ASIC asking what they're doing about enquiring into their clients' living expenses ... because this is some new material for ASIC to go out with," Mr Ashe said.
Mr Ashe said the Federal Court decision had made it clear that brokers cannot rely on statistical benchmarks when assessing their clients' financial position.
"Most brokers just use the lender calculator and the statistically-derived expense figures that are in there," Mr Ashe said.
"Some brokers have the stomach to ask for a full-blown budget; other brokers don't have the stomach for that and don't want to pry into their customers' lives. But the law now says you've got to at least ask the question."
According to ASIC regulations, brokers must have "processes in place to adequately monitor compliance" with their licence conditions and the credit legislation.
Mr Ashe said it is easy for brokers to misinterpret this subjective requirement and to falsely assume they do have appropriate processes.
He said what ASIC really means is that brokers need to have written procedures in place, regularly test those procedures, document the results and record how they plan to fix any flaws.
"What I think is going to happen – and what I've started to see happen – is the hardening of their [ASIC's] approach to their questions," Mr Ashe said.
"So if you've said you've got adequate systems and arrangements in place, they're going to mark you harder in 2015 on whether they agree."
[Related: Former ASIC investigator warns brokers over compliance]
