Mortgage Brokers:

Disputes with mortgage brokers will need first to be addressed through the regulatory mechanisms of the Credit Ombudsman Services and/or the Financial Ombudsman Services. It is compulsory for all mortgage brokers to be registered with these organisations, and the resolution of any complaints against a mortgage broker will first be attempted at this level. Mortgage brokers are experts in their field providing professional services to their clients. They are therefore expected to conduct their activity and discharge their duties to the highest industry standards.

The Australian Securities and Investments Commission regulates brokers through Australian Credit Licence. Standards of competent are therefore set by this body which administers the licensing of professionals who seek to offer brokerage services to the public. The National Consumer Credit protection Act (known colloquially as NCCP) forms the main legislative framework within which mortgage brokers operate. Any complaints of professional negligence against mortgage brokers will necessarily need to be assessed against these standards.

The assessment of a claim in professional negligence is not a trivial affair. If a person is considering suing a mortgage broker for negligence advice, the services of an experienced negligence solicitor may be required to prepare the case. Legal advice concerning the negligence of a mortgage broker will be invaluable in grounding this preparatory work. As a successful claim in negligence depends on evidence of a breach of an industry specific “duty of care”, a significant amount of investigative work will need to be completed before a claim can be either put together or assessed for any potential defence.

The “duty of care” and the relevant industry standards of professional conduct are established by representative bodies such as the Mortgage and Finance Association of Australia (known as the MFAA) and the Finance Brokers Association of Australia (known as the FBAA).

The MFAA has an established Code of Practice which requires that all members “comply with all laws”, “maintain training standards”, “hold professional indemnity insurance”, “arrange appropriate finance for consumers”, “act promptly and properly in relation to finance applications”, “disclose commissions and other benefits”, “maintain IDR and EDR schemes”, and “consider hardship applications.” [1] The objectives of the Code are to:

(a) Promote and establish professional standards between Consumers and Members and between Members in the mortgage and finance industry;

(b) Promote commitment by Members to compliance with laws and regulations and the spirit of those laws and regulations;

(c) Promote the maintenance of the high public standing of MFAA membership accreditation; and

(d) Promote ethical and fair business practices for the benefit of consumers, the public, and Members. [2]

Likewise, the FBAA has its own Code of Conduct, which addresses the following broad principles and concepts:

1. Responsibilities of Finance Broker to the Client;
2. Responsibilities of Finance Broker to the Credit Provider;
3. General Obligations of Finance Broker;
4. Internal Dispute Resolution Process;
5. Procedure for Escalating Complaints to the FBAA;
6. Disciplinary Action by the FBAA; and
7. Liability of Mediation Officer, Referee and FBAA Disputes Resolution. [3]

The general obligations of the broker (point ‘c’ above) under this Code include the following matters:

• Dealing with Information;
• Relationships with Employees and Subcontractors;
• Professional Indemnity Insurance;
• Membership to the FBAA;
• Dispute Resolution Procedures;
• Dealings with Trust Moneys;
• Dealings with Pecuniary Interests;
• Dealings with Credit Facilities;
• Obligations in relation to the Sale of Property and Goods;
• Dealings with Licensed Valuers;
• Conjunctional Arrangements; and
• Legal matters relating to Cross Border dealings. [4]

It is from among these principles and concepts that the requisite “duty of care” can be investigated and the merits of a case in professional negligence against a mortgage broker can be assessed. The process can be convoluted and complex, and the laws that relate to professional negligence claims are as much in flux as changing community expectations.

Other Disputes involving mortgage brokers can include the following:

• Charging clauses for commissions;
• Charging clauses for fees;
• Caveats for Security for Commissions;
• Caveats for Security for mortgage broking Fees; and
• Challenging Caveats for mortgage broking Fees.

All of these areas can involve very complicated considerations of law and fact. The services of an experienced negligence lawyer as well as a financial disputes solicitor will be of great assistance. If you require legal advice about any of the above financial disputes, you may contact one of our financial disputes lawyers in Sydney for an appointment to discuss the particulars of your case.

If you need assistance with a claim against a negligent mortgage broker, you may wish to contact our firm by telephone on (02) 9233 4048 or email us at info@navado.com.au and make an appointment to see one of our solicitors.

[1] Key Initiatives in the Code of Practice (Mortgage and Finance Association of Australia, ed. 9 December 2012) at p 1. A copy of this document is available on the MFAA website located at <www.mfaa.com.au> (accessed 21 November 2013).

[2] Clause 2.1, Ibid. General standards are outlined in Clause 4.

[3] See the general contents of the Code of Conduct and Dispute Resolution Service (Finance Brokers Association of Australia, undated). A copy of this document is available on the FBAA website located at <www.fbaa.com.au> (accessed 21 November 2013).

[4] General Obligations of Finance Broker, Ibid.

This webpage (and any material or wording appearing on this webpage) is provided for general information purposes only and does not constitute any Legal Advice. It does not take into account your objectives, your instructions or all of the relevant facts and/or circumstances. Navado accepts no responsibility to any person who relies on the information provided on this website. We further refer you to our Disclaimer.