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The compliance grenade

The combination of ‘compliance’ and ‘grenade’ is too often used in the same sentence these days.

The ever changing landscape of the mortgage broking world has forced its constituents to either ‘pull the pin’ or ‘fall in line’ with legislation.

As we wade through the complex language of do’s and don’ts there is a minefield of potential hazards which could unintentionally stop a business dead in its tracks.

The ASIC squeeze is being felt by many, with frequent reports of brokers being ejected from the industry for non-compliance. Compliance is not our only Achilles heel in this industry; combine it with privacy laws and we have a double-edged sword at our backs to contend with.

The recent change in privacy laws extends the list of commandments we are committed to uphold. Protecting client information, particularly with referrals, has stepped up another level an area commonly overlooked, leaving brokers wide open for breach of compliance.


We have all dealt with referrals at one time or another. A simple transaction of one party referring another party’s service. A ‘win win’ situation, for all it may cost you might be a bottle of wine or evening drinks at the pub. How can this joyous occasion of business generation become harmful for our endangered Australian Credit Licences?

Easy. There is a fine line between what can and cannot be shared between mutual clients. We have chosen a common scenario which is problematic at best when dealing with referrals and referral partners.

Case: A referral partner, being a real estate agency, refers a client through to an Australian Credit Licence (ACL) holder or mortgage broking company for the purposes of determining borrowing power. A simple one-line email with borrowing power has been supplied; however, the referrer demands more information to aid in their property sale.

Issue: The major issue here is the purpose of the information. The broker has conducted the required interviews for the purpose to provide credit advice. This information can contain assets, liabilities, income, expenses and any other pertinent personal information relating to the supply of credit.

In spite of stipulated signed privacy agreements, the property company has no entitlement to the financial information disclosed to the broker. In addition to this, the property company has no authority to use the information or advise the client on how to use their funds or borrowing power.

At the end of the day, it is the ACL holder’s responsibility to ensure that the referrer has passed on the client information in the correct manner (a compliant referral agreement needs to be signed prior to business taking place). It is also the responsibility of the ACL holder to ensure that personal information is contained and not disclosed to parties who have no right to the respective information.


Solution: This issue can be the height of disagreement and has the potential to seriously deteriorate business relationships. Education in the new system and compliance is paramount. So long as the referring party understands their obligations and/or rights to client personal information the relationship should remain strong.


The compliance grenade
James Chatfield, mortgage broking, legislation

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