The implementation of legislative changes that enhance reference checking of mortgage brokers changing licensees has been welcomed by the Mortgage & Finance Association of Australia (MFAA).
Today’s announcement by the Australian Securities and Investments Commission (ASIC) on the reference checking and information sharing protocol now allows aggregator to participate in the reference checking process for brokers moving to and from them, regardless of if they are the broker’s licensee or not.
MFAA CEO Anja Pannek explained that the reference checking protocol was introduced in 2021 in response to the Royal Commission to mitigate the risk of misconduct, however aggregators who were not a broker’s licensee weren’t originally included
“Licensees are required to conduct a reference check before accrediting or onboarding a broker. Overall, this worked well however was restricted to information sharing between licensees only,” she continued.
“Given many brokers hold their own license, this meant aggregators were excluded from the process in a large number of cases, a clear gap in the protocol.”
“We’ve advocated for the protocol to be extended to aggregators since it was introduced so that it is comprehensive, fit for purpose and reflects how the industry operates. So, we’re pleased to see these changes come into effect.”
The MFAA made numerous submissions on the reference checking protocol supporting its expansion, including in its 2023-24 Pre-Budget submission.
According to Ms Pannek, the expansion of the protocol will make the whole broker accreditation process more robust, holistic and simpler.
“This change means Australian borrowers can have even more trust and confidence in the broker industry.”” she said.
The MFAA also believes these changes to the reference checking protocol will remove the need for letters of separation, also known as exit letters.
“Letters of separation are unregulated – reference checking is. The practise of letters of separation was put in place at a time when there was no regulation, no way of checking the background of a broker seeking accreditation or re-accreditation. This practice has now gone way past its expiry date,”Ms Pannek said.
“Given we now have a comprehensive reference checking regime that includes all key stakeholders, letters of separation should no longer be required.
“We’ll be working with industry highlighting the need to move from letters of separation to reference checking – both with aggregators and lenders.”
The MFAA has also been working with major aggregator and lender members through its Accreditations Working Group on a simple, easy to use accreditation form for brokers moving from one aggregator to another aggregator.
“The aim of the form is to make this process easier for aggregators, lenders and brokers in those cases. The form will be hosted on our website for industry use.”
The MFAA’s reference checking and information sharing online learning module has been updated to reflect the changes, including case studies so brokers know what to expect from the reference checking process if they choose to change licensees.
The module is available to MFAA members free of charge until 30 November 2024.
The changes to the reference checking protocol were part of the Treasury Laws Amendment (Modernising Business Communications and Other Measures) Bill 2023, passed in September 2023.
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