Mortgage brokers in Australia need to improve their standards to reduce the risks to consumers, according to a report prepared by the Consumer Credit Legal Centre in New South Wales and released by the Australian Securities and Investments Commission (ASIC).
The report identifies a range of problems consumers experience in dealing with brokers which include poor advice and the increased costs which may result from inappropriate loans, inadequate disclosure of fees and commissions, inconsistent documentation and uncertainty about the nature and price of the service.
In a small number of cases, the report found fraudulent activity such as manipulating loan applications.
ASIC executive director of consumer protection Peter Kell, says up to one in two home loans are now sourced through brokers but there needs to be clarity as to whether brokers are acting for consumers or are really agents for the lenders.
Brokers can provide a valuable service to consumers faced with an ever-increasing choice of credit options, he says
"People should be able to approach brokers with confidence, in full knowledge of the costs involved and with appropriate avenues to redress if something goes wrong."
ASIC doesn’t have full responsibility for regulating the mortgage broker market (detailed consumer protection in the credit market place is provided by Australia’s states), it does have powers to take action in relation to misleading and deceptive practices and unconscionable conduct.
"We are currently investigating a number of matters with a view towards possible enforcement action and some of these were identified in the process of the report’s development," Kell says.
The report has also prompted the Mortgage Industry Association of Australasia to seek formal ASIC approval for its external dispute resolution scheme, the Mortgage Industry Ombudsman Scheme (MIOS).
"While the MIOS scheme does not cover the whole industry, ASIC is committed to ensuring that the scheme meets proper standards for those it does cover," Kell says.
ASIC has also published a new guide to using a mortgage broker on its consumer web site, www.fido.asic.gov.au, and is developing an online calculator to help consumers understand the costs of home loans, he says.
