A battle to regulate mortgage brokers has intensified in the wake of an ASIC crackdown on the burgeoning industry.
The reverse mortgage lenders’ peak body, the Senior Australians Equity Release Association of Lenders (SEQUAL), distanced itself from revelations last week that five promoters had fallen foul of the corporate regulator by distributing misleading advertising.
SEQUAL executive director Keiren Dell said ASIC was cracking down on brokers, who were the key players in the industry that needed more regulation.
“ASIC’s criticism highlights the need to ensure brokers are appropriately regulated and that they are properly educated and qualified to deal with this specialist lending category,” Dell said.
“Consumers need to be confident that brokers will act with the same high standards that SEQUAL requires of lender members.”
After being contacted by IFA, an ASIC spokesperson clarified that the five providers were indeed brokers and ASIC was not targeting lenders.
The warning came after ASIC found five cases of misleading advertising, including statements such as “there are no repayments”, “no loan repayments ever” and “Centrelink payments aren’t affected”.
ASIC was not in the practice of naming and shaming businesses by publicly naming the businesses that were investigated because all rectified the problems, an ASIC spokesperson said.
A recent shadow shop of reverse mortgage brokers and lenders by consumer watchdog Choice revealed wide default clauses, poor standards of information and salespeople that encouraged consumers to take out maximum possible loans.
The industry needed to work together to get rid of cowboys, according to Seniors Equity Direct broker Craig Swan, and SEQUAL could help by being more inclusive and accepting equity release providers.
Swan conceded the peak body could not solve the problem by itself and it was up to lenders and providers to work together to get rid of bad apples.
“SEQUAL has filled the void, but they are a lender body. It’s not their role really to be policing the industry,” he said.
“I don’t think this is a clear cut issue. They aren’t necessarily complex products – the loan itself is pretty straightforward – but the outcomes [can be] complex.
“There needs to be a much higher level of intermediary education.”
The Mortgage and Finance Association of Australia (MFAA) regulates mortgage brokers, who can be accredited through SEQUAL through an MFAA course.
Around 70 had been accredited to date, Keiren Dell said.
Dell said SEQUAL did not have the infrastructure or the desire to accept thousands of brokers as members.
“We’re not in the business of trying to encroach on other people’s space,” he said.
Deloitte researchers found 20,000 Australian home owners had a combined $1.1 billion in reverse mortgages last year.
