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The Big Story: Compliance in focus amid borrower revolt

A class action by aggrieved borrowers against the banks, highlights the importance of responsible lending practices.

Video transcript below:

Donna Sawyer, Australian Broker News TV
Donna Sawyer:
 Hi, I am Donna Sawyer and you are watching the Big Story on Australian Broker News TV.

Responsible lending practices are in focus as the banks face a class action from borrowers claiming they were given loans they couldn’t afford in the painful aftermath of the GFC.  While it’s clear brokers are not in the firing line, the case highlights the importance of following NCCP rules when providing mortgage advice.
Phil Naylor, MFAA
Phil Naylor:  All I can say is if brokers follow the law under NCCP, follow the guidance that MFAA provides, they shouldn’t have any issues.  
Steve Paterson, SAKS Consulting
Steve Paterson:  I think under the current legislation, modified in NCCP legislation, they are required to assist the lending institution in terms of determining a loan is not unsuitable and they are evolving rules and procedures by which that should be done.
Mark Haron, Connective
Mark Haron:  They are obviously responsible on every single transaction to make sure that the NCCP requirements are being followed and you know I think they probably do a much better job on it because they are a lot closer to the customer and also their 
livelihoods are at stake.
Donna Sawyer:  Mark Haron of Connective says most brokers are complying with regulations, but there are extra measures they can take to protect themselves.  
Mark Haron:  Clearly following the NCCP guidelines and adhering to them is the best way to ensure you don’t find yourself in any trouble.  You can go above and beyond that a little bit by keeping more thorough file notes and keeping track of the information a lot better, communication to customers is probably a key.  If you are communicating with your clients regularly, you will be aware of any concerns or issues that the clients may raise.
Donna Sawyer: He says brokers need to know when to terminate contact with questionable clients.  
Mark Haron: If you feel a little bit concerned that the information the client has given you is not a 100% correct or if they are perhaps not being 100% truthful, then clarify that, keep good file notes on it and whenever necessary stop doing the transaction, stop dealing with the client and advise the lender you are dealing with as well straightaway.  Don’t be too scared to bail out of the transaction.  I see too many brokers get caught up in these actions by customers where the customers haven’t exactly always been honest and truthful.
Donna Sawyer:  Steve Paterson of Sax Consulting says although no test cases have been brought under NCCP, brokers may be impacted by future conjecture over the regulations.
Steve Paterson: The whole debate really is around the question whether a loan is not unsuitable. Unfortunately I think at the moment there is some lack of clarity in that regard.  Enter the Credit Ombudsman and the like and ASIC have not been perhaps as clear as they could in specifying what constitutes a loan that is not suitable.  I think they have to be watched very carefully and it will evolve that in evolution, there could be some rocky roads for some brokers and lenders.  But you know time will tell.
Donna Sawyer:  For more on responsible lending and other industry news, click around the Australian Broker News website.  I am Donna Sawyer and I will see you again next week with the Big Story.