The MFAA has commented on the new responsibility being put on brokers by some banks to identify and report financial abuse, with CEO Mike Felton urging broker caution and calling for thoughtful discourse and education rather than the abrupt introduction of this new measure.
Listing the unclear and inconsistent requirements provided by the banks, the lack of training for brokers, and the insurance ramifications, the MFAA has advised its members to hold off on taking part in this new portion of the home loan process until further notice.
“We will need to work with the Australian Banking Association (ABA) and consult with the industry to agree on a guidance document that details requirements, and how brokers can reasonably meet them,” said Felton.
The MFAA is pushing for the implementation date to be moved back from 1 July, in order that all parties work together to identify a more sustainable and uniform approach to the issue of best providing for vulnerable customers.
“While we support the objectives of the code, these new requirements come with significant unintended consequences that could create poor outcomes for customers, potential financial exclusion, risk for the broker and potentially far-reaching legal problems for all parties,” said Felton.
Among the legal concerns named by the MFAA were the privacy issues of requiring brokers to report suspected financial abuse to lenders, breaching the broker/customer relationship.
Additionally, the legal advice provided to the MFAA suggests that if a broker were to sign a declaration stating the absence of abuse, the action would likely take them outside the bounds of their Professional Indemnity (PI) policy, leaving them uncovered and at risk.
Furthermore, Felton added, “Requiring untrained people to question and assess potential abuse may cause further damage and abuse to the victim. These situations of abuse need to be treated extremely delicately and brokers are not equipped with the necessary skills.”
While the MFAA CEO is “confident” an appropriate outcome will be reached, he expects it to take time.
“There should be a realistic timeframe to produce a standardised industry guidance and education so brokers have the best possible chance of meeting these new requirements in a manner that enhances the customer outcome,” he said.
“Finally, this needs to be implemented without creating undue and additional legal risk for brokers.”