The Mortgage and Finance Association of Australia (MFAA) has claimed a big win for mortgage brokers, with news that they are to receive streamlined obligations under the Design and Delivery Obligations (DDO) legislation limited to recording and reporting of product complaints to issuers.
The new legislation is due to kick in on 5 October and refers to the way that lending products are built by lenders and distributed by brokers and aggregators. The lender has to set a target market for the credit, with details about what class of consumer it is intended to serve.
Distributors are supposed to work towards that consumer determination, and have to pass on any complaints about the product to the lender. This legislation applies to all non-commercial credit, including mortgages.
Previously, it was thought that mortgage brokers would have to comply with DDO, but according to a new video message released by the MFAA, the peak body has successfully argued with Treasury to have them excluded.
“I’m really pleased to say that I can report positive developments from our discussion with Treasury over the last 48 hours,” said CEO Mike Fulton.
“Given that brokers have BID, which is a far higher duty which takes into account needs, objectives, priorities and preferences, we felt it was not appropriate for there to be an additional obligation for brokers to meet and take reasonable steps to meet this target market determination under DDO on each loan.”
“When the legislation came out, financial advisers were considered to be excluded conduct due to the personal advice provided under their BID, and yet that wasn’t the case for mortgage brokers.
“We reached out to Treasury to point out that our industry had an impending BID, which was in fact principles based, and therefore far strong than the ‘safe harbour’ BID that existed in financial advice, and that it was therefore not appropriate that the full obligations should apply to mortgage brokers.
Felton went on to say that their discussions had been fruitful and that brokers would not be forced to comply.
“We reached out to Treasury to express our concern, and there’s been strong acknowledgement of that problem over an extended period of time and confirmation by them that their intent is to address it, and that the intent was that mortgage brokers should be excluded conduct due to the personal advice that they provide under BID.”
“They’ve also been giving consideration about how to address it. The problem is that the fix requires an adjustment to primary legislation.”
“Now, the order to clarify the intent to exclude mortgage brokers, which is complicated by the very congested legislative agenda in Canberra that exists in Canberra at the moment, is not going to be in by the 5th October.”
“Up until now, we have been relying on the comfort from the Treasury team and the assurances that they are addressing the problem and that it will be fixed going forward. But we’ve had nothing to rely on in writing, up until today.”
“I’m pleased to say that, after a number of interactions that we have had with Treasury, that the DDO webpage and their announcement has now been adjusted to confirm that in writing.”
