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The mortgage broking industry is reportedly “close to finalising the wording of a broker statement around co-borrowers and financial abuse”, following weeks of uncertainty.
In a video update to brokers, the CEO of the Mortgage & Finance Association of Australia (MFAA), Mike Felton, revealed that the association along with “14 major aggregators and a number of brokers” have been working with the Australian Banking Association (ABA) to finalise a broker statement around financial abuse.
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As of 1 July 2019, the Australian Banking Association’s (ABA) new Banking Code of Practice brought in a higher standard of customer care when dealing with individuals and small-business customers – particularly vulnerable customers, co-borrowers and guarantors.
Lenders have been making brokers aware of these new requirements – and, in some cases, asking them to complete a financial abuse declaration form.
The broking industry initially called for caution around the new requirements, with both the MFAA and the Finance Brokers Association of Australia having previously urged their members not to sign declaration forms associated with vulnerability assessments for mortgage customers, warning that brokers may face litigation if they “get it wrong”.
Further, insurance firm Scott & Broad told The Adviser that the financial abuse changes were “done without very much consultation” and were being brought in just ahead of the end of the financial year (one of the busiest times of year for the finance and insurance industries), which created additional pressures.
Speaking to The Adviser, Scott & Broad representative Martyn Simmons revealed that the insurer only heard about the new requirements around one week before they were due to start.
He said: “Obviously, consultation would really be appreciated. Brokers seem to be getting a lot more requirements for compliance placed on them and it is important that people think of the implications for the PI. It shouldn’t be an afterthought.”
However, the CEO of the MFAA has now revealed that the industry is “close to finalising the wording of a broker statement around co-borrowers and financial abuse” and that this should “assist in addressing any remaining concerns in this area”.
“We look forward to sharing this with you once it has been socialised with more of the professional indemnity insurers,” Mr Felton said in the video update, adding that “excellent progress” had already been made with a number of insurers.
While Mr Felton said there was still “some way to go in sorting this out”, he said that “significant progress” had been made and it was “evident that any initial PI concerns are steadily being addressed”, particularly as some lenders have already begun “adjusting” their broker requirements under the code.
The head of the MFAA also confirmed that it was working closely with the ABA on developing a training module for brokers around financial abuse to ensure that brokers are “equipped to meet customer needs in this area” but are also “comfortable doing so”.
“Obviously, lenders will differ in the exact way they implement their obligations under the code, but the idea is to get the same core training to avoid you having to duplicate that across multiple lenders,” Mr Felton told broker members.
“We remain confident at arriving at a considered and appropriate outcome,” Mr Felton added.
The MFAA CEO concluded that the association has “always strongly acknowledged and supported the importance of recognising customers in vulnerable circumstances and treating them with sensitivity, respect and compassion”.
“What we requested (and, I believe, we are now achieving), is that the implementation should occur in a considered manner to ensure that it is orderly, sustainable and that customers are receiving the extra care that they deserve without posing further risk to them, of course, or to the industry.
“I feel we are now a lot closer in achieving that,” he concluded.
[Related: Brokers covered for financial abuse declaration: PI insurer]
