Aggregators have welcomed ASIC’s decision to defer implementation of the best interests duty, which was at risk of being “rushed” and falling short of expectations.
Last week, the Australian Securities and Investments Commission (ASIC) announced that it would defer the commencement date of the mortgage broker best interests duty (BID) until 1 January 2021.
The BID was initially scheduled to take effect on 1 July 2020.
According to the regulator, its decision was made to allow industry participants to “focus on immediate priorities and the needs of their customers” amid the COVID-19 crisis.
Several aggregators have joined the Mortgage & Finance Association of Australia (MFAA) and the Finance Brokers Association of Australia (FBAA) in welcoming ASIC’s decision.
The Australian Finance Group’s (AFG) general manager of industry partnership and development, Mark Hewitt, said ASIC’s decision was “sensible”, given the current market headwinds from the COVID-19 crisis.
“I think a lot of the industry, including AFG, were close to being ready or were ready [for the BID],” he told The Adviser.
“However, there are significant resources on the lender and aggregator side going into helping customers through hardship from COVID-19, so we think it’s a sensible delay.
“We and the industry will use the time to further train brokers on the requirements. At the end of the day, [we] know brokers fundamentally follow the guidelines now. It’s a matter of documenting those better and recording the conversations better so we’ll all be working hard to do that.”
Mr Hewitt added that the postponement would enable the industry to consider ASIC’s final BID guidance, which is yet to be handed down.
“That’s the missing piece of the puzzle,” he said. “We’re still waiting on the outcome of that. So, that is the missing piece.
“Everyone understands the broad intention, but there’s just a few of the finer details that we’re awaiting before we can finalise the implementation and training.”
Mortgage Choice CEO Susan Mitchell echoed Mr Hewitt’s sentiment, adding that the BID was at risk of falling short of expectations without adequate consideration of ASIC’s final guidance.
“I believe ASIC’s decision is sensible, given that the regulations and the regulatory guide have not been published,” Ms Mitchell told The Adviser.
“The last thing we want is a rushed implementation and risk not meeting the expectations of the duty.
“We are living in unprecedented times; the original deadline would have put unnecessary strain on people and businesses that are currently doing all they can to help borrowers weather the storm.”
Ms Mitchell added: “ASIC’s announcement gives aggregators and brokers breathing room to focus on customers’ immediate needs without the added complexity of operating within a new compliance framework.”
Connective executive director Mark Haron also welcomed the delay, noting that it would provide brokers with much-needed breathing space as they grapple with the challenges of the current operating environment.
“We’ve seen that this pandemic is putting a lot of strain on our brokers as they work hard to assist their clients,” he told The Adviser.
“Brokers play an important role in providing support and guidance to their clients through this difficult time, and it is important that they remain focused on client support and managing the level of work that the pandemic has created for the industry.”
Mr Haron added that the industry is “well engaged” in the transition to BID and would “continue to act in the best interests of consumers despite the delay”.
“We’re working closely with key industry bodies to make sure that we continue to implement and prepare for these reforms as much as possible before they commence next year,” he said.
While welcoming ASIC’s decision, Loan Market executive chairman Sam White said the aggregator would proceed as planned with its implementation of BID.
“Despite the timing being extended, Loan Market will forge ahead with our rollout, which will begin on Monday across Australia, he said.
“This is not only to satisfy the regulations but to stay true to our value to always strive to do better for our customers. We have approached BID implementation understanding that it is not just about compliance, it is about great customer experience.
“Our approach has been not just to add additional compliance forms to our process, but rather to look at improving the customer service experience and equipping our brokers with industry-leading time-saving tech.”
Mr White added: “As such, we will continue to roll out our BID-ready process, but we welcome the opportunity to do more coaching and training with our brokers rather than meet a deadline that was always very ambitious.”
“There is no doubt in my mind that the vast majority of brokers are operating in the best interests of their customers already, and I believe no one needs to change their DNA to comply with this new law.”
According to Purple Circle Financial Services’ chief operating officer, Frank Paratore, ASIC’s decision was reflective of the important role brokers play in delivering positive outcomes for the broader community.
“It should be noted that the additional and ongoing excellent work of our industry bodies and key partners, which have also worked tirelessly, has assisted greatly and contributed to this common-sense approach,” he told The Adviser.
“It also clearly highlights the government support for our industry, acknowledges the work that brokers do, and importantly, the due consideration and practical approach to the timing afforded to ensure effective implementation.
“Purple Circle Financial Services and the industry remain committed to BID implementation, but this delay clearly allows focus where it is currently needed.”
PLAN Australia CEO Anja Pannek said ASIC’s decision would ultimately benefit borrowers most impacted by the COVID-19 crisis.
“Over recent months, Australia’s community of mortgage brokers has been working tirelessly to support Australians who have found themselves in difficult financial situations as a result of this unprecedented situation,” she said.
“Our members’ priority has been in assisting customers to manage their financial position, and this deferral will go some way towards alleviating the additional pressure that comes with a change in regulation.”
Ms Pannek concluded: “We continue to see the BID as a positive milestone for our mortgage broking industry that will deliver a heightened customer experience and a pledge that brokers will always act in the best interests of their clients.
“We remain focused on supporting our brokers so they can continue to build their businesses and their value proposition around the customer.”
[Related: ASIC delays BID implementation]