Bank “strongly supports” best interests duty

In late August, Treasury released the draft mortgage brokers bill outlining its proposed best interest duty and remuneration reforms, and inviting industry input on its contents.

Suncorp was among the parties to submit a response during the consultation period.

In its submission, the non-major reiterated several times over that, as a smaller bank, a “viable and ethical” mortgage broker channel is critical to its success.

The bank continued to agree with Commissioner Hayne’s view that “the broker’s duty towards the customer has been ambiguous.”

“This Bill will more clearly articulate that the broker works for the borrower – not the lender, nor should they at any time be influenced by remuneration at the expense of the best possible outcome for the borrower,” the submission read.

However, Suncorp expressed concern over the bill being “a principle-based standard of conduct,” as defined by one of the supporting documents Treasury released in conjunction with the draft bill.

The bank warned that a principle-based approach to best interest raises “risks of an inconsistent application as individual brokers may develop their own principles in the absence of regulatory guidance.”

However, it also acknowledged that the ‘tick a box’ approach to regulation carries risks of its own.

As such, Suncorp supports the bill and the implementation of a best interests duty, but has called for “greater clarity” around proper application to be provided through an Explanatory Memorandum to the bill.

To further combat inconsistent application, Suncorp also called for:

• A clear understanding that a broker can only be assessed on the assistance provided to the borrower at the point in time the loan application was made, excluding hindsight or factors arising after the application.
• Clarification on the scope of assistance so both the broker and borrower are clear about expectations, reducing misunderstandings and helping to address them quickly if they arise.
• An obligation like those in line with the FOFA reforms or general insurance duty of disclosure requirements, which would help the borrower not only understand their position, but that providing accurate information helps them receive appropriate credit assistance.

In addition, the bank suggested a ‘credit-appropriate’ test be introduced with guidance from ASIC explaining how the regulator will measure whether the credit assistance provided by a broker has satisfied the requirements of the duty.

As an active participant in the Combined Industry Forum (CIF), Suncorp also used its submission to note that the proposed best interests duty closely aligns with the CIF’s recommended approach to ‘good customer outcomes.’

The four key measures of which are:

• The customer has a loan which is appropriate in size and structure
• The customer’s stated needs and objectives are met
• The loan is affordable for the customer
• The loan is applied for in a way that meets all responsible lending requirements