Should asset finance brokers have a duty to dob in the cowboys?
Incredibly, we’re approaching ten years since the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry began shining a light on some of the cowboys operating across financial services.
Ten years! Time flies when you’ve had a global pandemic in the middle of it, I guess.
One of the reforms that followed the Royal Commission was an expansion of the breach reporting regime. Since October 2021, the NCCP Act has included an obligation that, in certain circumstances, requires credit licensees to report misconduct involving mortgage brokers working under other licensees.
Under s 50C of the NCCP Act, the obligation arises where there are reasonable grounds to believe that a specified reportable situation has arisen in relation to another licensee and the relevant individual is a mortgage broker.
So, a few years into the regime, two questions interest me:
How well is this obligation working in practice, and should something similar apply to asset finance brokers?
On the first question, the answer might be a very Australian “yeah, nah”.
Reporting another broker isn’t necessarily straightforward.
You don’t have to be 100% certain that a breach has occurred – the test is whether there are “reasonable grounds to believe” that a reportable situation has arisen. ASIC describes this as an objective test based on whether there are facts or evidence that would cause a reasonable person to hold that belief.
But that’s still a reasonably high bar when you’re looking at another business from the outside.
And let’s face it: dobbing someone in isn’t exactly a celebrated part of Australian culture.
Which brings me to asset finance.
Given the regulatory attention that parts of the car finance sector have received, should a similar reporting obligation apply where an asset finance broker becomes aware of potentially serious misconduct by another broker?
Take advertising as a simple example.
Interest rates move. Yet there are brokers who can be remarkably slow to update digital advertising that continues to promote rates that are no longer actually available… and haven’t been for months!
Depending on the circumstances, that potentially raises misleading or deceptive conduct issues.
At the moment, an asset finance broker who comes across conduct that concerns them can report suspected misconduct to ASIC. But that’s a very different process from having the specific statutory reporting obligation to lodge a report via the licensee’s Regulatory Portal.
So here’s the question:
Would extending this type of reporting obligation to asset finance help the industry police its own backyard – or would it simply create another compliance obligation without really changing behaviour?
I’m interested in what asset finance brokers and licensees think.
Photo by Gary Bendig on Unsplash