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Australia’s ASIC Launches Mystery Shopping Program for Mortgage Brokers

The Australian Securities and Investments Commission (ASIC) has started a mystery shopping program — they call it “shadow shopping” down under — as part of its review of the mortgage broker industry. According to BrokerNews.com, ASIC is “delving into the suitability of brokers’ advice.”

ASIC said this is part of its effort to better understand the home loan purchase process, which goes beyond broker commission and remuneration.

“While broker remuneration practices may have an impact on home loan choice, ASIC recognises that a range of other factors influence which home loan products are purchased, and that the purchase experience may vary across purchase channel, i.e. via broker compared to directly from a lender,” said Michael Saadat, ASIC’s senior executive leader for deposit takers, insurers and credit services.

Ultimately, they want to know which factors, other than commission, affect which home loans clients buy, and whether consumer outcomes can be improved.

But this is more than just a marketing move. While ASIC wants to gain insights into how borrowers buy home loans or find decision making points in the whole process, this is also about regulatory compliance and ensuring that brokers are following the legal requirements in the Australian home loan process.

This past November, Saadat told Australian Broker magazine that anything they discovered “will be more about understanding to what extent brokers are potentially not meeting their legal obligations, and whether ASIC, for example, needs to produce more guidance around what they can or can’t say to consumers or whether some other action is required”. 

All of this comes on the heels of ASIC’s findings of rampant loan application fraud originating from the mortgage brokers in June 2017. After those findings, they launched a project to “develop industry-based and best practice solutions to prevent loan fraud, particularly in respect of the home-loan market.”

I sometimes wonder if we’d had similar oversights and compliance mystery shopping programs if the mortgage/credit crash of 2008 could have been avoided or at least lessened. I’m glad to see that mystery shoppers are going to be involved in regulatory compliance efforts.

This is something that mystery shopping agencies, whether in the US, UK, Australia, or elsewhere, can do for lawn enforcement agencies, government agencies, or regulatory agencies. The way ASIC’s program, and any other mystery shopping program, will work is to have either people who need home loans evaluate their loan buying experience, or hire shoppers to pose as home buyers and go through the loan application process without actually taking out the loan.

We’ve done age compliance shops for the purchase of tobacco and alcohol products, regulatory shops for fair housing in home and multi-family dwelling rentals, and have even helped some retail chains ensure their clerks are properly trained on the different rules and laws regulating sales of certain products.

If you would like to learn more about using mystery shopping as a way to monitor legal and regulatory compliance, please contact Measure CP and ask to speak with one of our mystery shopping experts.