In the final Regulatory Guide 273 (RG 273) for the mortgage broker best interests duty (BID) published earlier this week, ASIC introduced two topics which had not been covered in the draft materials.
The inclusions clarified brokers are expected to factor both current promotional offers from lenders and the availability of government schemes into their decision-making on which loan product best meets their client's needs.
According to ASIC Commissioner Sean Hughes, the regulator has aimed for the guidance to be “as contemporaneous as possible”; as such, given the increased relevance of the two topics over the last several months as the economy has felt the COVID squeeze, it was pertinent to clarify brokers’ responsibilities on both fronts.
“We are really dealing with the in-the-moment factors as and if they arise,” said Hughes.
RG 273 listed cashback or reward points offers, waived or reduced fees, or discounted interest rates as examples of the promotional offers credit providers may use to “entice customers to take out their products”.
“We expect that any promotional offer that is quantifiable will be considered as part of the cost of the credit product,” the final guide reads, emphasising that brokers should be aware of the eligibility criteria, exclusions and time limitations around such offers.
“You should also consider whether a lower interest rate, or other features such as an offset account, would provide more benefit to the consumer than the short-term benefit offered by the promotion. For example, where a consumer has short-term expenses or debts, a cashback offer may provide them greater value than comparatively marginal cost savings over the life of the loan,” it continues.
However, RG 273 also acknowledges the value of some promotional offers is not as easily quantified, at which point brokers must use their discretion to determine what is most valuable according to the priorities of specific consumers.
As for government schemes, the guidance stressed brokers should take particular care to research available options when working with first home buyers, pensioners or social housing tenants.
“We generally expect you to educate consumers about the availability and eligibility requirements of these schemes. You may also help consumers to assess their eligibility and the potential benefits of the schemes,” the guide reads.
However, it does also note and accommodate for the fact that obtaining a scheme’s full benefit sometimes requires steps to be taken by the consumer before the broker even begins to provide credit assistance.
Notably, it was not only the contents of the guidance which were impacted by the COVID pandemic, but the entire timeline for implementation.
“This law was initially intended to commence and have full compliance effect as of next week but, in light of the pandemic, we realised many brokers will be operating from remote environments and dealing with consumers in difficult financial positions,” Hughes explained.
“We thought the entirety of the economic environment we are in made it appropriate to give brokers additional time. We think six [extra] months is about right, and don’t envisage there’ll be any change to the commencement date of 1 January 2021."
