Brokers could face jail for breaking new laws
By
Luke Cornish
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10/05/2010 12:00:00 AM
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10
comments
Brokers face the prospect of hefty fines or jail time for not providing consumers with independent guidance on choosing a home loan, regardless of any volume hurdles erected by lenders, ASIC has said.
“A conflict arises where an interest of the licensee conflicts with a legal obligation that the licensee owes to the client, including one that arises under the credit legislation,” ASIC said in a regulatory guide to the National Consumer Credit Protection Act.
Brokers who break those legal obligations face fines of up to $11,000 or two years in jail or both. If it is a company that is found guilty of breaching those obligations, the penalty can be as high as $1.1m.
CBA requires that brokers must submit at least four mortgage applications and settle a minimum of three loans within a six-month period while Westpac requires at least one loan to be settled every six months.
A complaint on the practice submitted to the ACCC by Refund Home Loans was dismissed last year and the FBAA has taken up the fight with Australian Broker reporting last month that the industry group is considering further action with the ACCC.
The MFAA is also concerned with the placing of volume hurdles for brokers with CEO Phil Naylor holding discussions with the lenders involved last year to see whether there were alternative arrangements that could be put in place.
"At that time, that wasn't possible so we are now talking with ASIC," Naylor told Broker News. He said that discussions with ASIC were held a couple of weeks ago and that the MFAA was still waiting for a reply from the regulator.
Latest Comments
Total:
10
comment(s)
Deana Mayor on
10 May 2010 12:47 PM
Why don''t ASIC make Lenders remove the minimum loan submission - then Brokers would not be hindered in any way. It costs brokers money and time to get re-credited with Lenders and this happens simply because a Broker does not use that lender over a certain period of time.
We all know Lenders come back and say we need to make sure Brokers know about our products and can submit deals properly - but a good broker does this anyway.
All issues now seem to be falling more on the Broker than the Lenders...
Adrian on
10 May 2010 12:49 PM
This is probably the most crucial question currently confronting the broker industry. It is an untenable situation for a broker(especially a sole trader) to have to contemplate volume hurdles while being legislatively constrained (correctly in my view) to ensuring that clients get the best possible advice. CBA have declared that brokers will have to ''suck it up'' as they have no intention of changing their position, and have similarly conveyed to me that aggregators have no power at all to influence this decision. I can only hope that sufficient, continual pressure from brokers themselves will see sanity prevail in this matter. The argument that a minimum volume hurdle ensures better quality is flawed in my view, despit some statistical data used by the bank to justify this - logically a good broker using conscientious and professional practices could easily submit an excellent application to the bank, even if he or she did so only once every 6 months. Indeed, since December 2009, CBA have made it difficult for me to find clients willing to select a CBA product because of pricing and serviceability issues. I want to be be fair and reasonable in my dealings with all lenders but respectfully argue they should do the same for me.
Ben Hall on
10 May 2010 12:51 PM
Writing 2 Wpac and 6 CBA loans a year should not be a big stretch for any good broker in this market. It''s time to make your peace with CBA and move on.
A bigger conflict is going to be advising a client to borrow when they can''t afford it just so you can keep them happy and also make a commission. That''s what will get you in hot water with ASIC.
Working with clients to show them how to improve their financial position, to qualify for loans and afford them, etc, etc is something that every broker will need to have in their bag of tricks...
Pardon Me Broker on
10 May 2010 01:11 PM
This is what the new regulations and licencing are all about !!! ASIC will have to look very carefully at the draconian policies of ALL lenders who have minium valome levels.
The brokers will need to make independant recommendations about which loan is most suitable to a borrower.The fact that a lender has a minimum loan level policy is Irrelevant ( BEN HALL TAKE NOTE) , it will be a licencee''s role to be INDEPENDANT , how can that occur if a broker has a minium loan level to meet , it is a conflict , for example what happens if the say as example Westpac have rates that are too high and a lower than competetive LVR policy, the broker simply will not be able to recommend that loan.
It is really good to see the MFAA becoming involved. ASIC will need to get involved as well to ensure licencees are not compremised.
What this means is that Brokers will need to be brokers and AGGREGATORS who will also be licencees will need to aggregate, that is they will need to say to the banks that your requirements for minimum valomes from brokers are going to place them in a position where they have a comflict of interest and we need to advise you to remove the minimum volume requirements for individual brokers and let the aggregator negotiate a level the is AGGREGATED for all members og that aggregator, or you will be removed from our panel.
Very interesting times indeed.
David - Broker 12 Years on
10 May 2010 01:14 PM
(Reference: Ben Hall Comment 10/5/2010 12.51pm)
We cannot simply say "make your peace with CBA and move on" for if every lender adopted the same volume requirements as CBA then it would significantly inhibit the ability for "ALL" professional brokers to "ALWAYS" recommend the appropriate loan to suit the borrower''s needs.
Surely the correct solution would seek to prohibit any actions that may diminish the protection of borrowers.
SOLUTION for CBA & Westpac - Remove volume hurdles and simply cancel the accreditation of brokers who cannot lodge an application in the correct format.
Brad Oliver on
10 May 2010 02:01 PM
I actually asked an officer from ASIC this question during a field visit to my office a couple of weeks ago.
Steve on
10 May 2010 11:03 PM
Well if that lender is not on YOUR panel, what can they do? Next they will advise us to include Off panel lenders into the mix. What then? We will need to tell clients to go direct because that is a better option? If your not accredited with a lender, they don''t come into consideration....simple!
zzscci on
18 May 2010 08:42 AM
When will aggregators gut the guts to stand up to lenders and represent the brokers they signed up as their hard-working honest fontline face in the market place? Aggregators, in my opinion, are supposed to represent their brokers NOT just be pliable puppets for the lenders who simply pass on the unjust requirements of lenders. When will the broker associations actually have some teeth and get their lender members to see reason to their unconscionable behaviour. When will aggregators and member associations stop the injustice between brokers and bank lending officers, and agents of a single lender? I am sick of having to pay for re-accreditation because i don''t meet the volume requirements - BUT - i know that lender''s credit policy better than the banks own representatives. It isn''t Just!
mark turner on
24 May 2010 07:28 AM
brokers because when they are independant have to be impartial jsut by the nature of being a broker. Of couorse brokers will source the best deal for the client if they dont get the loan approved they dont get paid. Broker dealer Groupds who support a particular Banks because of commission strructure will be in trouble
Graeme Kluck on
24 May 2010 07:33 AM
Lenders still follow the mistaken belief that brokers don''t know their products and refuse to consider that the client needs come first and if a certain lenders products don''t meet client needs then they won''t get the business. How hard is the concept to understand. The current lender position has the potential to create circumstances where brokers could breach the requirements of the new regulations.