Mortgage brokers are regulated by the Australian Securities and Investments Commission (ASIC), which is responsible for overseeing the financial services industry in Australia. The ASIC has set out a number of regulations and guidelines that mortgage brokers must follow, including:
- Mandatory Licensing
All mortgage brokers in Australia are required to be licensed by ASIC. To obtain a license, brokers must meet certain education and experience requirements, as well as demonstrate that they are of good character and meet the ASIC’s financial requirements. This helps to ensure that only qualified and trustworthy brokers are able to operate in the industry.
- Duty of Care
Mortgage brokers have a duty of care to their clients, which means that they must act in their clients’ best interests when providing advice and services. This duty of care includes providing accurate and relevant information, disclosing any conflicts of interest, and ensuring that the products and services recommended are appropriate for the client’s needs.
- Disclosure Requirements
Mortgage brokers are required to provide borrowers with a written document outlining the details of the loan they are recommending, including fees and charges, interest rates, and any other relevant information. This helps to ensure that borrowers fully understand the terms of the loan they are taking out and can make an informed decision.
- Dispute Resolution
If a borrower has a complaint about a mortgage broker, they can lodge a complaint with the Australian Financial Complaints Authority (AFCA), which is an independent dispute resolution service. The AFCA has the power to investigate complaints and make binding decisions, which helps to ensure that borrowers have a fair and transparent way to resolve disputes with their broker.
In addition to these regulatory protections, borrowers also have a number of other protections when dealing with mortgage brokers. For example:
- Best Interests Duty
Since January 2021, mortgage brokers have been required to act in the best interests of their clients. This means that brokers must put their clients’ interests ahead of their own, and cannot recommend a loan that is not suitable for the borrower’s needs. This provides an extra layer of protection for borrowers, as brokers are legally required to act in their best interests.
- Consumer Credit Laws
Borrowers are also protected by a range of consumer credit laws, which set out the rights and responsibilities of both borrowers and lenders. These laws include protections against unfair lending practices, such as predatory lending and excessive fees and charges.