Are your compliance ducks in a row?

Broker advice consultant Robert Forbes gives his tips for establishing watertight compliance processes

As the regulation of the mortgage broking industry and consumer lending continues to evolve, it is now more important than ever for brokers to focus on their compliance practices.

At last year’s PLAN Australia National Conference in Perth, I spoke about how the Sedgwick report, the Combined Industry Forum, the royal commission and Productivity Commission were likely to lead to heightened compliance expectations for brokers. Here are the main takeaways from that presentation.

Make detailed enquiries

There is no doubt that compliance is currently a hot topic for our industry, which is experiencing a raft of changes from regulators, lenders, aggregators and clients. Staying on top of responsible lending practices and keeping accurate records is therefore essential to both protecting broking businesses and ensuring the best outcomes for clients.

Making the right enquiries into a client’s needs and objectives is a key first step in determining the product types and features that would suit them. Having appropriate conversations with your clients regarding their financial situation is crucial. Ask questions about their income, employment status, living expenses and assets and liabilities prior to investigating loan options. Ensure they fully understand the loan or lease they are applying for.

Verifying information is important in both spotting any inconsistencies in applications and preventing fi nancial hardship for the client

As well as getting to know the client’s current situation, brokers should consider any future plans that could impact on their ability to service a loan or lease. Financial difficulties can arise from a number of factors, whether that’s a change in income, a relationship breakdown, illness, having children, or taking on too much debt, so asking the right questions at this stage can really help the client further down the track.

I recommend brokers use an itemised spreadsheet to show how they arrived at a living expense figure and provide evidence of conversations that have taken place in order to determine a loan amount that is not unsuitable for the client’s needs.

Verify, verify, verify

To be fully compliant, brokers also have a responsibility to use documentation and third-party sources to verify information provided.

According to the NCCP’s guidance notes on verification, a lender’s internal documentation requirements do not reduce the obligation of a broker to separately verify financial information, so often it is necessary for brokers to go over and above the lender’s requirements.

Verifying information is important in both spotting any inconsistencies in applications and preventing financial hardship for the client.

I recommend brokers should always sight original copies of documents, such as payslips, letters of employment, bank statements, tax returns and group certificates, and check for inconsistencies, such as a job title that does not match the stated income, bank statements that show undisclosed debts, spending habits that do not match stated expenses, Medicare cards that show additional dependants, employers that do not show up in a Google or ABN search, and documents with incorrect spelling, additions and subtractions, or unusual formatting.

Errors or inconsistencies can have a significant impact on brokers, even if they are unwilling or unknowing participants, so it is essential to carry out the right checks.

Check in with your aggregator

Aggregators play a major role in helping brokers navigate their compliance obligations, working closely with members to ensure they have quality processes in place, and providing regular updates on any upcoming changes.

The good news is that there is plenty of help out there. PLAN Australia, for example, views compliance as a key success factor for brokers and shares rich information, such as compliance checklists, to help brokers in their businesses and when working with their clients.

Compliance also features heavily in PLAN Australia’s training and development program, which includes a dedicated YouTube channel and digital professional development days so brokers can learn when and where they choose, as well as a range of state and national events.

I encourage brokers to continue to refer to relevant parts of the NCCP Act 2009 and check their aggregator website for updates. Those with questions can touch base with their partnership manager and compliance team, who will have the latest feedback from regulators and lenders on what they need to know.


Robert Forbes is a Perth-based credit consultant with a background in both personal and commercial loans. His strong banking experience includes working with Bankwest/ Commonwealth Bank.