First risk advice, now interest only loans
Banks and other mortgage lenders have been told by the regulator to pick up their act on interest only loans, following an Australian Securities and Investments Commission (ASIC) investigation which identified significant shortcomings.
The findings of the review have led ASIC to foreshadow follow-up scrutiny and possible enforcement action.
The ASIC report, which could be viewed as being just as damning as the regulator's assessment of the life insurance advice sector, found that in a review of more than 140 consumer loan files from bank and non-bank lenders , 40 per cent over-estimated the affordability of loans, 30 per cent failed to consider whether interest-only loans met the borrower's requirements and over 20 per cent had failed to consider the borrower's actual living expenses.
Commenting on the findings, ASIC deputy chairman, Peter Kell, noted that the lenders involved in the review had already begun implementing changes based on the regulator's findings.
"The rest of the lending industry, including brokers, should now take note and swiftly review the practices they have in place to ensure they comply with their responsible lending obligations," he said.
"As a result of this review, ASIC has commenced follow-up investigations in certain cases which are ongoing," Kell said. "Where necessary, ASIC is considering enforcement action or other regulatory action."
Recommended for you
Financial Services Minister Stephen Jones has shared further details on the second tranche of the Delivering Better Financial Outcomes reforms including modernising best interests duty and reforming Statements of Advice.
The Federal Court has found a company director guilty of operating unregistered managed investment schemes and carrying on a financial services business without holding an AFSL.
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
