ASIC last week released its draft Regulatory Guidance (RG), outlining its proposed approach to how Best Interest Duty (BID) will apply to mortgage brokers and providing tangible examples and parameters to aid with compliance, as well as fleshing out the conflict priority rule.
Its release on 20 February marked the beginning of a four-week consultation period, with all interested stakeholders invited to share their thoughts on the document in the coming month.
“We have released this draft guidance for consultation as early as possible, to help promote certainty for mortgage brokers as industry prepares for the new obligations to commence in July,” explained ASIC Commissioner Sean Hughes.
The regulator intends to publish the final guidance before the new rules go into effect on 1 July 2020.
Finance Brokers Association of Australia (FBAA)
While the FBAA is currently conducting a full review on the newly released RG, managing director Peter White has expressed cautious optimism.
“Upon initial review of the draft RG, I was pleasantly surprised that ASIC had taken on some very pointed queries that industry has within the compliance obligations around the BID, which was poorly written into the BID Bill and Explanatory Memorandum," he said.
White particularly appreciated this RG following the late 2019 release of the revisions to responsible lending, which “did not actually alter” the standing guidance.
“I’ve been reviewing regulation for over 12 years now, and this is a very appreciated approach to these matters from ASIC,” he said.
Following the “deep dive” into the details of the RG that is underway, the FBAA plans to consult with ASIC directly on any real-life scenarios brokers seem likely to face that have yet to be addressed.
According to White, there are already multiple meetings set up in the coming weeks regarding the construction of the final RG.
Loan Market executive chairman Sam White also welcomed the guidance and the way in which ASIC has handled the matter thus far.
“I’m pleased we now have a set of guiding principals to base our preparation for BID from and applaud ASIC for supplying the guidelines just two weeks after the bill formally passed both houses,” he said.
“I’m also pleased the industry will be given the opportunity to continue to work with ASIC and provide feedback.”
According to White, there’s been a marked theme linking the concerns expressed to him.
“The business owners and brokers I’m speaking to are consistent with their feedback regarding BID; they are wary about the amount of extra time they will be spending on BID-safe processes and how they’ll stay compliant under the new legislation,” he explained.
This sentiment was also expressed by every commenter who responded to the initial draft RG coverage on Broker News.
Despite this widespread concern, White is “more confident than ever” Loan Market is prepping its brokers and businesses to adjust to the new legislation with ease.
“We’ve introduced The Loan Market Way, a process that maps the core elements of BID while saving them time with industry-leading technology and providing a seamless customer experience - we don’t want it to be a compliance overload for anybody, especially not the client," he said.
“There is no doubt in my mind that the vast majority of brokers are operating in the best interest of their customers already and I believe that the DNA of brokers will not change under this new law, but rather our processes – as an industry and as individuals – will need to be more comprehensive and transparent.”