A leading solicitor says the changes to the Australian Registrars' National Electronic Conveyancing Council's (ARNECC) participation rules, which are currently under consultation, will create problems for broker/client relationships if adopted.
Currently, Version 2 of ARNECC’s participation rules ensure lenders must conduct verification of identity (VOI) procedures early in the loan process (normally at application stage) and before a loan is approved and loan documents prepared. Often these functions are undertaken by brokers on behalf of lenders.
However, the proposed procedures – Version 3 – will mean that, in order to meet safe harbour, brokers will need to conduct VOI again at the time the mortgage is signed. Not only does this result in an unnecessary duplication of processes, but Version 3 proposes to change the insurance requirements for brokers to comprise professional indemnity insurance and fidelity insurance for the purposes of verification of identity.
The insurance Version 3 requires is significantly higher than the insurance held by many brokers. Jon Denovan, a partner at Gadens law firm, says that unless this requirement is modified, brokers will not be eligible to conduct VOI for lenders who wish to fall within safe harbour and this could be problematic for broker/client relationships.
“If somebody else has to go to identify a customer, it really interferes with the broker/customer relationship. That is what I am concerned about. Customers choose brokers because they expect a broker will provide them with personal one-stop service and this strikes at the heart of that,” he told Australian Broker
“The kind of insurance they [the ARNECC] are seeking will be prohibitively expensive for most brokers.”
Gadens will be lodging a submission on behalf of the MFAA and a number of other lender and broker clients, but Denovan is urging the major aggregators to join the fight.