ASIC begins shadow shopping brokers

ASIC said this is part of its effort to better understand the home loan purchase process, which goes beyond broker remuneration.

“While broker remuneration practices may have an impact on home loan choice, ASIC recognises that a range of other factors influence which home loan products are purchased, and that the purchase experience may vary across purchase channel, i.e. via broker compared to directly from a lender,” said Michael Saadat, ASIC’s senior executive leader for deposit takers, insurers and credit services.

Saadat told Australian Broker that ASIC is conducting consumer and broker research to better understand the home loan purchase process as part of its review of mortgage broking practices.

 

What are ASIC looking for?

The research looks to determine what factors – beyond broker commission – affect how and which home loan products clients buy, and whether and how consumer outcomes could be improved.

Within this, ASIC aims to gain insight around how consumers buy home loans, identifying critical points in the buying process, key inputs and decision-making criteria at such points, and how behaviour is influenced during the process.

Saadat said ASIC also wants to understand how the broker shapes which product a consumer buys and whether the advice offered results in positive consumer outcomes. These include making an informed choice, buying products that meet needs, and being provided with the right amount and relevant information in order to make a choice.

In November, Saadat told Australian Broker magazine that anything discovered through shadow shopping “will be more about understanding to what extent brokers are potentially not meeting their legal obligations, and whether ASIC, for example, needs to produce more guidance around what they can or can’t say to consumers or whether some other action is required”.

 

What can Broker’s do to prepare?

In the past, ASIC had pointed to record-keeping as something brokers needed to improve on to better explain the process that had occurred.

“This is not about going into the review thinking that there are significant problems that need to be uncovered; in fact this is about really trying to understand how the interactions between the broker and the consumer are playing out, given that we don’t get any sense of that really from the loan files,” he said at the time.

Major industry players supported ASIC’s recommendations in the Review of Mortgage Broker Remuneration when it was released in March 2017. However, they advised ASIC and the government to proceed with caution in implementing those recommendations.