Banking Code of Practice Announcement
As you are aware a key element of the Australian Banking Association’s (ABA) new Banking Code of Practice (the Code) is to ensure vulnerable customers are protected, and good outcomes for all customers are preserved. This will be implemented from 1 July 2019. Mortgage brokers are therefore being required by some lenders to assist in meeting their obligations under some elements of the Code, most notably with regard to vulnerable customers, co-borrowers and guarantors.
The Code’s requirements regarding vulnerable customers appear to be interpreted and implemented differently by some lenders. Furthermore, this requirement has also been done without mortgage broker consultation and with some lenders now also requiring declarations or attestations to be signed by the mortgage brokers.
Whilst Specialist Finance Group (SFG) supports the overall objectives of the Code for better consumer outcomes, our strong view in regard to vulnerable customers is that these new requirements may come with significant unintended consequences that could lead to poor consumer outcomes; significant broker risk and legal ramifications for all parties including mortgage brokers.
In consultation with both the MFAA and FBAA along with industry colleagues and related parties, and according to interim legal advice, requiring brokers to report suspected financial abuse to lenders could be a breach of the broker/customer relationship and may raise privacy issues. In addition, legal and other advice provided suggests that if a broker was to sign a declaration regarding whether there is abuse, it is likely that this activity would not fall within the occupation of a ‘mortgage broker’ and is therefore not covered under a broker’s Professional Indemnity (PI) Insurance Policy.
It is our clear view and understanding, that a broker signing a declaration may pose significant risk to the brokers Professional Indemnity Insurance.
“At this stage SFG in consultation with both the MFAA and FBAA along with other related parties is strongly advising its broker members in acting professionally and with duty of care , that they should definitely not complete this part of the application process until greater clarification is provided around awareness and with no further undue and legal obligation to the mortgage broker in this regard”.
SFG will continue to work through this matter which affects all mortgage brokers, in association with the MFAA, FBAA and industry parties and will provide further updates in a timely manner.