Credit regulator ASIC and the MFAA are at odds over the verification onus being placed on brokers, but according to ASIC's Greg Kirk, it is not possible for brokers to shirk their responsibilities.
In a review of broker adherence to responsible lending legislation released last week, ASIC acknowledged letters from accountants as "suitable verification of income", most often used for non-PAYG borrowers.
However, ASIC urged brokers to adopt "best practice", which would involve brokers verifying the consumer's actual level of regular income and the basis on which these income statements are made.
ASIC also suggested brokers are obliged to include comments on the client's previous earnings and any underlying information included, as well as detailing the accountant's length of engagement by the client.
The MFAA - through Gadens Laywers - hit back against the verification imposition, saying brokers should be seen in tandem with lenders, with brokers fulfilling only 'preliminary' assessment.
"Lenders often take the 'base' information provided by brokers, and make further enquiries, and then conduct their own verification and credit assessment," the MFAA response said.
"It will be very inefficient - and indeed unworkable - if brokers are expected to duplicate these additional enquiries, verification and assessment."
The MFAA claims that sources of this information may even 'go on strike' if they have to provide the same information twice, or even more, to satisfy the needs of the broking channel.
However, ASIC senior executive leader of deposit takers credit and insurers, Greg Kirk, said "it is not possible under responsible lending to contract out the responsbility of making an assessment".
Speaking with Australian BrokerNews, Kirk said that certificates from accountants play a "useful role" in assessing non-PAYG borrowers in the low-doc market, but brokers "need to go beyond that".
"Best practice would be to make sure that what is coming from accountant includes or specifies what the borrower's income is, and better still attaches the source document for that," Kirk said.
"It is not enough to get a certificate from an accountant which says that a borrower can afford a loan without saying anything about the basis of that assessment of a borrower's financials and circumstances.
"If, as a broker, you seek to rely on a certificate and it turns out that the accountant did so in error or did so inaccurately, then the broker is the one in breach of legislation," Kirk said.
The MFAA contends that it is "quite appropriate" for brokers to assess based on preliminary and limited information and verification. "The consumer is protected because the final decision is with the lender."
Kirk acknowledged that depending on the circumstances of the borrower, the enquiries and verification required is scalable, and in most cases will not be in a position to get as many as a lender.