Brokerage preps for best interest duty

by Madison Utley16 Oct 2019

A mortgage brokerage that was quick to voice its support following the release of Treasury’s draft mortgage broker bill has provided further insight into its stance through outlining the considerations it would like to see shape the finalised legislation.

While its input is considered by the government, Aussie Home Loans has assembled an in-house team to get ready for the best interest duty (BID) era.

“Aussie has established an internal working group to explore how our current sales processes, customer documents and technology might need to be adapted to ensure BID obligations are met,” said Aussie CEO James Symond.

“It is imperative that Aussie and other brokers continue to put the customer first and provide much needed competition in the home loan market.”

In its submission, Aussie echoed sentiments shared by others, supporting the principles-based approach to BID, but calling for more clarity in a number of areas.

Preferably, the submission requested this clarity be provided through the creation of rule-based regulation for matters where there is “a clear consensus on the right way to do things.”

Alternatively, but less ideally, the submission suggested regulator-generated guidance on how the principles are to be satisfied.

“Aussie would welcome the opportunity to work with ASIC to develop such regulatory guidance which should seek to clarify BID requirements and provide examples of how these may differ from existing responsible lending requirements,” the document continued.

Defining ‘best’

Aussie requested legislative action be taken to ensure the ‘best’ option does not become analogous to ‘cheapest price’.

Citing ASIC’s report on the consumer experience of getting a home loan, the brokerage reiterated there are many important factors beyond price that are equally valid for the broker to take into account based on the customer’s stated requirements and objectives.  

Aussie requested guidance from ASIC to address how such factors interplay with the interest rate in order for brokers to reasonably meet their BID.

Clarifying comparison

Treasury’s draft bill states that brokers must consider a range of products prior to recommending a home loan, informing the consumer of that range and the options it contains.

Aussie highlighted it currently provides consumers access to over 2,500 mortgage products and that consumers expect their broker to work through the mountain to present them with “a small range of options that meet their requirements and objectives.”

“Accordingly, we would request that ASIC construct any regulatory guidance with this in mind, together with an acknowledgment that the credit representative can only present options from the range of products for which they are accredited by a lender and are authorised and knowledgeable to represent."