"Lenders need to get real. The issue has been pussy-footed for far too long," Berry told Mortgage Link’s annual conference.
Getting rid of "rogue players" has been a major problem for the broking industry. "The NZMBA has had its hands tied." While it could throw such people out of the association, it couldn’t prevent them from continuing to operate in the industry, he says.
With such high volumes of loans being processed by the industry now, fraud is inevitable, but the lenders need to take action to stamp out dodgy lending schemes.
Currently, the Privacy Act prevents banks from passing on information about rogue players to each other and competitive issues also come into play. "Lenders need to get real on this issue as well," Berry says.
At the same time, brokers have a duty of care to protect both the lenders and their clients and should be looking at the potential for transactions to go wrong and the resulting likely impact on the financial viability of their clients.
It is essential to act to prevent the industry’s reputation from being tarnished by the rogue players.
"At the end of the day, legislation and licensing of brokers is the only real answer. Nothing is more certain than, at some stage soon, we will be regulated," Berry says.
While in the past, brokers have reacted in horror at such statements, "I believe brokers should be embracing the opportunity for licensing."
For one thing, licensing would mean that a lot of the part-time players in the industry would decide that becoming licensed was too onerous. "That will drive the volumes to the specialist players."
The key thing is for brokers to be in a position to mould any legislation to their liking. "It’s important to have self-regulation, but with empowering legislation behind us."
Berry says the indications from proposed legislation to govern investment advisers are that the government’s preference is for self-regulation with supporting legislation. "That’s encouraging for us," he says.
