Following yesterday’s bombshell report from the Australian Securities and Investments Commission (ASIC), commissioner Sean Hughes spoke to Australian Broker about the timing of its publication, the expectations for brokers moving forward and how the responsibility is shared by the consumer.
While the ‘Looking for a mortgage: Consumer experiences and expectations in getting a home loan’ report was released just days after the government went public with its mortgage broker draft bill, Hughes explained the timing was coincidental rather than a concerted barrage against the industry.
“I want to assure you and your readers that there was no plan around getting this report out at the same time as the government’s announcement. Those two events occurred entirely independently of each other,” he said.
“We don’t hold off on releasing information. We publish when it’s ready to be published. We didn’t know until Monday that the government was going to be releasing its timetable for the best interest duty legislation later this year.”
That said, the many legislative initiatives announced since the government released its royal commission roadmap on 20 August do intersect in many regards. For example, the findings from ASIC’s consumer mortgage report have contributed to the ‘mortgage broker accountability’ project announced earlier this week in ASIC’s four-year plan.
“That piece of work is still being developed. It includes reference to this report. It includes reference to the support and advice we’re providing treasury on the development of the best interests duty. It references the working group on the interest rate tool. And, this is very much in its infancy, we’re looking at data gathering from aggregators about what brokers do in terms of assessing the requirements and objectives of their customers,” said Hughes.
The commissioner also elaborated on the conclusion from yesterday’s report that brokers must better communicate to customers how the home loan options presented were selected for them.
“There needs to be a conversation up front, whether the arrangement is being done through a broker or direct to a lender, as to what a customer’s actual needs and requirements are,” said Hughes.
“It’s about looking at it through the eyes of what’s most important to your customer: what are the features, circumstances, and pricing they’re seeking to get here? How can you give them the best number of options possible?’”
While ASIC’s report negatively highlighted that 58% of those surveyed had only been given one or two loan options, Hughes clarified that brokers don’t need to rustle up more options if there aren’t any suitable, but instead better communicate the limitations with their customers.
“There may be circumstances where, because of the nature of their borrower – they may not have a good credit history, for instance – the number of options the broker puts in front of them might be quite limited.
“But, it’s important for the broker to say, ‘Look, I’ve got to be honest with you. Because of your credit history, because of what you’re seeking to borrow, because of the value of the assets that you’re seeking to have secured, we’re not going to be able to do much for you. There are only one or two options at best.’”
Because each consumer’s situation is different, Hughes was firm that ASIC is unlikely to ever impose a minimum number of options brokers must present to their customers.
He explained, “We’re not a black letter regulator. That wouldn’t take into consideration the availability of credit in the market for that particular borrower, or the circumstances of that borrower in terms of their repayment capability and the security they’re offering and their history.
“But what is clear from this report, is that consumers are disappointed. There were quite a few stories where people thought they were going to be getting something better than they ultimately did.”
However, while Hughes does expect brokers to actively look to improve the experience for their customers moving forward, he also acknowledged the shortcomings of the consumer.
“Just as we’re saying brokers and lenders need to step up and better respond to the objectives and needs of the customer, the customer needs to better inform themselves about what they’re actually looking for, what they prioritise – whether it’s price alone or whether it’s functionality and bundled options – what they can and can’t afford, and what impact the loan repayments will have on their lifestyle.
“It’s of real concern to us that one in 10 consumers struggle to make their repayments. Consumers need to do more,” he finished.