After a comprehensive review into the credit practices of lenders providing interest-only mortgages – which found that banks have been “falling short” of their responsible lending obligations – corporate regulator ASIC revealed plans to undertake a review of mortgage brokers in regards to interest-only lending.
Shifting regulatory scrutiny
Speaking at the FBAA conference held in the Gold Coast in November, ASIC senior executive leader – deposit takers, credit & insurers, Michael Saadat
, warned brokers that the regulator would be shifting its focus.
“Going forward we intend to undertake a further review in the interest-only area moving on from lenders to brokers with a particular focus on brokers’ consideration of consumer requirements and objectives,” he said.
With brokers also advising consumers on interest-only loans, Saadat says it is only fair that the same scrutiny be placed on the third party channel.
“To share some feedback we have gotten from lenders and brokers in this space – and I will try and be completely open with you – ever since publishing our report on interest-only loans and getting the lenders to agree to make the necessary changes, I keep getting asked by lenders what is ASIC doing to make sure brokers will also make changes to their processes.
“When I have spoken to brokers, I’m asked what is ASIC going to do to hold lenders to the same account as brokers.
“It is important to remember that both lenders and brokers separately have responsible lending obligations to meet. It is not good enough for a lender to point the finger at brokers and it is not good enough for a broker to point the finger at lenders.”
Nothing to see here
The chief executive of the FBAA, Peter White, welcomed ASIC’s review, saying that it is only fair brokers are also investigated, however, he also said ASIC must remember that it is the lenders who ultimately write the rules – not the broker.