Speculation mounted last month that the practice could become mandatory after Australian Credit Licensing and National Consumer Credit Protection Act specialist Greg Ashe said ASIC officilas he had met with were “astonished” brokers were not already going to such lengths to verify expenses.
But speaking to Your Investment Property Magazine’s sister publication Australian Broker, Michael Saadat, ASIC senior executive leader - deposit takers, credit & insurers, said the regulator only wants to see brokers be more thorough in the enquiries they are currently making, especially in regards to interest-only applications.
“One of the key things that we saw in our review of interest-only loans, and also working with some lenders recently, was that some lenders weren’t making enquiries into a consumer’s expenses. That was the first concern we had, that those enquiries weren’t happening,” Saadat told Australian Broker.
“In terms of what is then required to verify a consumer’s expenses, what we say in RG209 is that you can use benchmarks as a form of verification and we say that similarly in the interest-only loans report – that benchmarks are a form of varication that you can use,” he said.
“We do, though, also say in the interest-only report that using a scaled benchmark – where the benchmark reflects different income levels – is more appropriate.”
While Saadat said ASIC won’t officially require brokers to comb through statements, he did say there may be some circumstances where it might be an appropriate course of action.
“We are not saying that brokers need to obtain bank statements for every customer and we are not expecting brokers to go through bank statements line by line to work out exactly how much consumers are spending down to the dollar,” he said.
“But it is important that in the right circumstances that the additional steps are taken but also very important that the outcome of those additional steps are recorded on the file.”
ASIC’s clarification of the what they expect is likely to be welcomed by those in the industry, after the idea of going through bank and credit card statements was described as an “invasion of privacy.”
“I wouldn’t be comfortable going through somebody’s bank or credit card statements item by item to verify their expenses. To me that would be an invasion of privacy,” Stella Ukhanna, mortgage broker with Rocket Home Loans, said.