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Broker ban raises questions about employment verification: ASIC responds

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Australian Broker | 17 Apr 2013, 08:00 AM Agree 0
The banning of Sydney-based broker Arthur Sperling raised a number of questions about ASIC's expectations surrounding client employment verification
  • Brado | 17 Apr 2013, 10:19 AM Agree 0
    that still didn't answer the questions posed... why cant they clarify what 'reasonable steps' means? reasonable is a very subjective method... what is reasonable to me may not be reasonable to you....
  • Rach | 17 Apr 2013, 10:35 AM Agree 0
    Well, that's clear as mud, lol!
  • Mike Clarke | 17 Apr 2013, 10:51 AM Agree 0
    So here is a scenario discussion surrounding employment check:-
    1) Broker locates consumer/borrowers' employers address & phone contact details.
    2) Broker already has confirmed clients home address & has pay slips & bank statements to confirm resi address & incomne source.
    3) Broker contacts employer payroll section via phone to check on borrowers terms & conditions of employment.
    4) Employer politely or otherwise declines to discuss / assist on grounds that it breaches 'privacy protection' laws.
    5) The loan is submitted & the lender fails to complete background employment checks. The loan is subsequently approved & borrowers receive disbursement of funds.
    6) Loan then falls into arrears & with lender follow up its found to have been falsified by the borrowers.

    Who carries responsibility? N.B. Broker made reasonable attempt at employment verification but is blocked by 'Privacy Laws'

  • Perth Broker | 17 Apr 2013, 10:53 AM Agree 0
    I totally agree Rach - clear as mud! Is it not possible for ASIC to set out in plain unadulterated English just what they mean. I must admit I am still none the wiser as to what they require? The cynical side of me says it is easier for them to ping Brokers who BELIEVE they are doing the correct thing as required under NCCP..
  • Jim W | 17 Apr 2013, 11:16 AM Agree 0
    Perhaps ASIC would like to explain the responsibilities of the lender. Obviously nothing at all.
  • Julie | 17 Apr 2013, 11:24 AM Agree 0
    This is a disgrace! I am not saying that ASIC is incorrect in cancelling someone's licence for criminal activities, BUT to disqualify a broker for not 'making reasonable enquiries' which are not clear to anyone is jeopardising peoples livelihoods. Broker's are not fools. Tell us what you want us to do and we will do it. That simple! I called ASIC just last week asking for clarification relating to SMSF lending....they told me to ring the ATO as they weren't sure. I rang the ATO and they told me to ring ASIC. Not fair guys!
  • Country Broker | 17 Apr 2013, 11:28 AM Agree 0
    This is a very difficult area especially when the empolyer does not want to confirm employment ( Govermewnt simply will not do it).
    I always ask to see an origional pay slip , and do an ABN search for private employers ( free on ABN Look up) , I make clear file notes and get a bank statement which shows the salary going into the bank account .
    I also point out all lenders are licence holders as well , they MUST be held accountable if they have failed to at least try and verify the employment and act as responsible lenders.

    I have also at times asked to see a PAYG tax return and kept copies including the PAYG certificates and ATO assessmentadvice to the client .

    i suspect in this case the broker may have been submitting quite false documents.

    The MFAA/ FBAA must be active here and even COSL in asking ASIC for further clarification on tghe gudance note.
  • Rastafarian | 17 Apr 2013, 11:29 AM Agree 0
    If we go to the employer, they can and probably will cite privacy legislation and not give us any information anyway, surely if the lender accepts two computer generated payslips without verification, then why should we go further than they do to verify employment and income.
  • Jeff | 17 Apr 2013, 11:30 AM Agree 0
    Deliberately made to be grey, so any situation can be deemed correct or incorrect by ASIC at their whim. The rules were clearer before the legislation. All answers are always the same..."you need to seek legal opinion"..beauracracy gone mad; and guidance dead.
  • A Broker | 17 Apr 2013, 11:39 AM Agree 0
    My question here is: Who gets all the benefit out of this?

    The lenders get the borrowers & enjoying the interest payments while brokers did all hard work from A-Z of being both saleman and professional for preparing application till settlement. Brokers also pay for all advertising, running costs, maintaining licence fee etc - for an average of only 0.55% upfront which also have a risk of 100% clawback within 12mths.

    If the lender policy requires only 2 payslips without further 'reasonable' verification, why all the blame points to brokers when their 'potential clients' fall into arrears? And how about clients that always paying goods - will there be any question raised or just the profits to retain with lenders?

    Remember, lenders also have their ASIC credit licences too that requests 'reasonable' verification.

    I just don't see it fair at all of how ASIC treat brokers.
  • Nick | 17 Apr 2013, 11:42 AM Agree 0
    How wonderful it must be to be in a nice government job with all the benefits that come with this employment spending your time looking for fault in others.

    For the rest of us out their running a small business and trying to look after our clients and staff plus make a buck I would just like to thank all the beureaucrats for turning this once simple fun business into a nightmare of red tape where we scared to almost write a loan!
  • Keith of the west | 17 Apr 2013, 11:46 AM Agree 0
    I've declined loans on basis of questionable income or potential risk for income falls to see same loans approved by bank lenders with no questions asked now tell me who is more responsible?
  • Tim | 17 Apr 2013, 12:41 PM Agree 0
    A little common sense is required here. With a broker introduced loan there are three parties namely the applicants, the broker and the lender.
    Firstly in the case of Mr Sperling there wasn't just one breach he had 10 !!!
    Secondly if a broker gets documents as per Mike Clarke's example and documents the phone call to the employer then I think this is "reasonable steps". If the loan applicant in Mikes' example has clearly set out to mislead both the broker and the lender then the broker cannot be held responsible.
    Thirdly lenders these days have sophisticated means of detecting fraudulent documentation. It was only stated in the prior article that the fraud was detected on applications submitted by Mr Sperling. It did not clearly state whether they went to settlement or not.
    In the case of Mr Sperling it appears maybe it was more than just the applicant setting out to mislead the lender.
    Take what you believe are reasonable steps, document these and act honestly at all times and you should not have anything to worry about. Hopefully ASIC and the lenders will continue to catch and ban these fraudsters.
  • 1martym1 | 17 Apr 2013, 12:48 PM Agree 0
    are lenders being banned too? massive double standard.
  • Thomas | 17 Apr 2013, 01:04 PM Agree 0
    Hi Mike,
    In that instance, I'd suggest obtaining a consent from the client(s) to contact their employer for the purpose of verifying their employment/income. Alternatively, if I was ASIC, I would suggest that you failed on a reasonable basis to verify the client(s) employment and income and therefore shouldn't have submitted the loan.

    So, all you need is a proforma consent from clients to be able to contact whomever to verify their credentials. If the 3rd party decliens to speak to you, you can always have the client call/email to confirm the validity of the authority. It's actually a pretty simple process - we do this all the time as financial advisers.
  • Alex | 17 Apr 2013, 01:57 PM Agree 0
    The whole NCCP requirement is a load of nonsense. If a broker obtains pay slips and/or bank statements confirming pay received, there is nothing else the broker can do. It is up to the lender to make enquiries if they wish to confirm income and employment. After all, the banks cut broker commissions during GFC, but have not reinstated them to former levels despite recording record profits. Brokers get the business, it is up to the lenders to make appropriate enquiries.
    All directives from ASIC talk in vague terms -reasonable enquiries, reasonable steps, review of current debts, etc. What does it all mean? Example: Broker gets a computer generated pay slip. What does the broker do apart from look at it to confirm salary and any deductions? Unless it looks completey questionable, the broker submits with application, and the lender verifies the pay slip, if they choose to. Ultimately, if it proves fraudulent, the first port of call is the borrower not the brokers.
    By the way, I am willing to debate about NCCP being a load of nonsense with anyone.
  • Maria Rigoni | 17 Apr 2013, 03:16 PM Agree 0
    When you consider the NCCP legislation is 613 pages, the regulation is an additional 339 pages, and ASIC tell you to get legal opinion if you ask them to clarify either their regulatory guide or something on the 952 pages, I feel it is OK for reasonable people to treat this law in the way they would a comical skit demonstrating nonsense. It's laughable!

    The NCCP is bad legislation that needs to be thrown out and replaced with short, succinct and clear protection laws that have a balance between responsible lending and responsible borrowing.

    Disclosure does not equal protection and it is wrong of our law makers to develop laws that attempt to "protect people from them self" and when they fail to rely on the blame game.

    I do not believe that it is reasonable for an accredited loan writing broker to prove that the potential borrower is telling the truth, in all the circumstance. If I am given a payslip and have no reason to doubt the client is lying to me then that is reasonably verifying employment income.

    An accredited loan writer is required to do a preliminary assessment of a potential borrowers financial situation, requirements and objection to lessen the likelihood the client will be recommended or assisted to apply for a loan that they do not want and cannot afford to repay in now time and circumstances.

    The lender is expected to complete a more vigorous assessment as they are advancing the money that is assessed in now time and circumstances however the money has to be paid back over an extended future period of time without fixed in concrete circumstances.

    Brokers are introduces of potential new business to lenders. As such they have a obligation to obtain the preliminary documentation that a particular credit provider requires from the potential borrower to determine if the loan product is not unsuitable. The NCCP does not have any relevance if a particular loan contract from a particular credit provider is not not taken out by a consumer credit borrower, so greater checks above and beyond the lenders requirement is a waste of everyone's time.

  • Bruce | 17 Apr 2013, 03:31 PM Agree 0
    Reasonable steps? How about Banks providing the means for us Brokers to be able to order valuation reports upfront so that we can take 'reasonable steps'? Sorry, we're not allowed to have these copies?? You Banks need to keep costs down?? But we're supposed to do income verifications?? Sigh.....
  • Papery | 17 Apr 2013, 04:36 PM Agree 0
    Dear ASIC...define 'scalable' again.
    Something else to think about.... so I ring the employer & he confirms that client is emplyed as declared by the client on the SIGNED & DATED Fact does that determine whether or not one loan product is more suitable then another???
  • Broker | 18 Apr 2013, 10:10 AM Agree 0
    It just continues to get stupider doesn't it?
  • Mary | 18 Apr 2013, 02:08 PM Agree 0
    In obtaining an employment check you send through your privacy and they advise you the information as requested. It's that simple but who has the time to follow this through besides some pay persons work on certain days and not available. Same applies to R.E confirmation. Time wasted...Client upset and the lender has the same problem, once again time wasted, client upset and pays out the broker for length of time loan has taken to process.
  • Tony | 29 Apr 2013, 03:12 PM Agree 0
    the broker industry is dying quickly. time to find a new career or go bust or end up in ASICS hold for some rubbish.
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