Mandatory broker identifier numbers should be established and used on every home loan to help provide ASIC with “the complete and accurate broker picture it desires”, the MFAA has said.
Writing its response to Treasury’s consultation on ASIC’s Review of Mortgage Broker Remuneration, the CEO of the Mortgage & Finance Association of Australia (MFAA), Mike Felton, noted that ASIC had “uncovered areas where inadequate data existed across the industry”.
Indeed, ASIC’s report into remuneration proposed that there needed to be better oversight of brokers and broker businesses, potentially by using “a consistent process to identify each broker and broker business”.
To meet this requirement and “produce reliable data sets to assist with better governance and oversight”, the MFAA has suggested that brokers should be provided with an individual number.
Mr Felton wrote: “The MFAA believes that the ASIC report provided a snapshot of the industry, and for the first time, collated a consistent data set to assess remuneration practices. It also uncovered areas where inadequate data existed across the industry.... ASIC is keen to work with the industry to determine the required data set, as well as to seek advice on what would be other good measures of consumer outcomes. The MFAA sees that this is an extremely important task, as this process will also produce reliable data sets to assist with better governance and oversight.”
He continued: “The MFAA believes that an important first step would be to develop a single broker identifier number to enable ASIC to get the complete and accurate broker picture it desires.
“We believe that such an identifier, when developed, should be mandatory for use on each home loan sold. Such a unique identifier of the broker that has intermediated any loan must be provided to the lender with the application and stored by the lender throughout the life of the loan and for a period of seven years after the last interaction with a customer in line with other NCCP Act requirements.”
The MFAA noted that while there were existing identifiers in use, such as credit licence numbers or credit representative numbers, it is not “clear whether these numbers cover all brokers and staff”.
As such, the association proposed that it could therefore require a “different number” to be used by those who operate directly under their employer’s ACL number.
“This solution may initially be a lender-specific unique identifier, but in time ideally each broker should receive a single identifier across all lenders,” the submission read.
Mr Felton concluded: “To respond to the need for greater transparency and data collection, which will assist the industry to self-regulate, the MFAA recommends a series of significant changes, including (in time) having mandatory ‘unique identifiers’ for brokers for each loan funded, the provision of loan concentration and performance data to aggregators to allow for data/risk-based monitoring, and improved public reporting to increase transparency in the mortgage market.”
The association also outlined a range of recommendations and barriers to some of the proposals for broker remuneration (as previously reported), such as the example that lenders pay upfront commissions on the drawn amount net of offset, with a top-up, and that brokers should improve transparency when offset accounts are recommended or used.
The MFAA is currently working with the Finance Brokers Association of Australia (FBAA), the Australian Bankers’ Association (ABA), the Customer Owned Banking Association (COBA) and the Australian Finance Industry Association (AFIA), as well as unnamed "representatives from bank and non-bank lenders, aggregators and brokers", to develop a cross-industry response to ASIC’s report on mortgage broker remuneration.
The Mortgage Industry Forum will formally present its progress to ASIC, Treasury and the industry by the end of the year.
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