Brokers need to understand their compliance obligations, have Professional Indemnity insurance, membership of the Australian Financial Complaints Authority (AFCA) and must obtain Credit and National Criminal Check reports.
The mortgage and finance industry operates within a legislative framework and set of regulations that finance brokers must comply with.
An education prerequisite for joining the MFAA is completion of an Initial Compliance Pack (ICP), which is designed to assist mortgage and finance brokers in their understanding and compliance with relevant legislation that governs corporate, broker and lending activities.
The Initial Compliance Pack is available in the MFAA Learning Hub.Access the ICP
The Initial Compliance Pack comprises the following units:
Finance brokers must be covered by, or personally have in place, Professional Indemnity (PI) Insurance for no less than $2 million for any one claim and $2 million in the aggregate.
The insurance policy must also have at least 12 months PI 'run-off' cover, which you should check with your PI insurer to ensure you are appropriately covered.
When applying for MFAA membership individual applicants will need to provide a PI certificate of currency showing your name and/or your employer's name. You may need to ask your employer for a copy of the current PI certificate of currency to attach to your application.
Where your name or your employer's name is not noted on the PI certificate of currency, you must provide written evidence from either the PI insurer or the insured showing that you are covered under an alternative PI insurance policy.
Professional Indemnity Run-Off Cover
As professional indemnity (PI) insurance is on a 'claims made' basis, you need always to be holding a PI policy when a claim is made. This is important as potentially claims could be made some years after a loan is taken out and the insured may no longer be working in the industry or may have moved to a different aggregator group under a different PI cover from the one which existed when the loan was taken out. In these situations, the finance broker (loan writer) may not be covered for the claim.
While this may not be an issue of urgency now if you are operating under a current PI policy, it could impact you, in respect of claims made well after the event, if you subsequently leave the industry, or perhaps have changed PI policies over the past few years. The way to overcome this and not be exposed to claims coming 'down the track' is to take out 'run-off' cover.
It is an MFAA policy that all full members should have at least 12 months PI 'run-off' cover (check with your insurer to ensure you are appropriately covered).
Where can I obtain PI insurance?
Many aggregators provide group coverage for their finance brokers and will incorporate this into their services and fee schedule. Other aggregators may simply outline their requirements for PI insurance and refer you to an insurer or insurance broking organisation.
The following organisations listed below can assist with PI insurance.
Please note the MFAA accepts no liability for the goods or services provided by the organisations listed.
A credit report will be required as part of your application for membership of the MFAA.
You may authorise the MFAA to obtain a credit report on your behalf, which you can request in your online application for a fee. Note a copy of this report cannot be made available to you.
Alternatively, you can arrange your own report, which must be dated no earlier than three months prior to your application for membership. When obtaining your own report, you need to ensure both consumer and commercial credit information is included in the report, as we are unable to accept credit reports that do not comply with these requirements.
A National Criminal History check is required as part of your application for membership of the MFAA.
For membership identification purposes the criminal check must have the same name and date of birth as the membership applicant and the criminal check must be dated no earlier than three months prior to your application for membership.
All MFAA finance broking and business members operating as loan writers and involved in the provision of credit require membership of the External Dispute Resolution (EDR) Scheme that is overseen by the Australian Financial Complaints Authority (AFCA).
To find out more information visit AFCA’s website www.afca.org.au