MFAA welcomes new reference checking legislation

The passing of legislation allowing for a comprehensive reference checking regime for the mortgage and finance broking industry has been welcomed by the Mortgage & Finance Association of Australia.

The Treasury Laws Amendment (Modernising Business Communications and Other Measures) Bill 2023, was passed on Monday 4 September. As a result, the National Consumer Credit Protection Act will now allow aggregators who are not licensees to give and receive references for brokers moving to and from them.

“We’ve been working with our members, Treasury and ASIC for more than two years on this piece of legislation which is aimed at continuing to mitigate the risk of misconduct, therefore adding to the already high levels of trust and confidence in the industry,” said MFAA CEO Anja Pannek.

Since reference checking came into effect on 1 October 2021, reference checks for brokers moving between aggregators, or from a lender to an aggregator, could only be conducted under qualified privilege by outgoing and incoming licensees.

“This change strengthens the current reference checking process by ensuring that aggregators always form part of the process, regardless of if a broker has their own licence,” said Ms Pannek.

“Furthermore, we expect these changes will mean the comprehensive reference checking regime will replace the often fraught and unregulated practice of ‘letters of separation’ that has been in industry for too long.”

“For brokers, that would mean moving between aggregators will be easier, simpler and more efficient.”

Aggregators provide compliance support as a service to the mortgage and finance broking industry to facilitate brokers to operate their small businesses in a way that is compliant with the law.

“As many mortgage and finance brokers hold their own license, it makes sense for the reference checking framework to extend to aggregators that provided compliance support to those licensees,” Ms Pannek noted.

Importantly, under the legislative changes, aggregators will be protected by qualified privilege when providing and receiving references when they are not the broker’s licensee.

For the legislative change to be implemented, ASIC will consult with industry and update its current reference checking framework.

“While there will be a consultation process, we have already engaged extensively with our aggregator members, ASIC and other finance industry associations in preparation for this consultation and do not foresee any impediments to this process or the timely implementation of the updated reference checking framework,” said Ms Pannek.

The MFAA has also recently established a cross-industry Accreditations Working Group with major lender and aggregator members with the core objective to ensure that friction is removed from the various accreditation processes within industry, including the movement of brokers across aggregators.