Issue Date:  -  Monday, 4 September 2006

Finance broker fined for mismanaging a mortgage application

Licensed finance broker Australia Imperial Financial Services Pty Ltd of Brisbane St, Perth has been disciplined for breaches of the Finance Brokers Control Act relating to a home loan application.

Australia Imperial Financial Services Pty Ltd, trading as Imperial Finance, was reprimanded and fined $1,500 by the State Administrative Tribunal. It was ordered to pay costs of $1000.

The company admitted:

• It failed to hold money for a property valuation in trust as required by the Act;
• It charged their client a loan application fee of $447.50 which is in excess of the $250 allowed under the maximum remuneration schedule; and
• It had not recommended to its clients in writing that they seek independent advice given that the company had a financial interest in the loan.

Consumer Protection received a complaint from a Nollamara couple regarding an application they made for a home loan through Imperial Finance.

“The couple thought they were applying for a home loan from Imperial Finance but became concerned when they discovered it was actually being arranged through a different company,” Consumer Protection Commissioner Patrick Walker said.

It is understood that a number of lenders provide wholesale funding to brokers or mortgage managers who then badge the loan with their own name.

“Brokers who arrange such loans are able to set their own commission which affects the interest rate and therefore the amount of money the consumer pays over the life of the loan,” Mr Walker said.

Western Australian laws require that finance brokers and mortgage managers are licensed and comply with a Maximum Remuneration Schedule and Code of Conduct. 
            
“The Code requires brokers to disclose any interest they may have in a loan transaction,” Mr Walker said.

“Prior to its disbandment in October 2005, the Finance Brokers Supervisory Board commenced a review of the Code with a view towards strengthening the disclosure requirements. It is anticipated that a new Code, with strengthened disclosure requirements, will be introduced later this year.”

Details of licensed finance brokers can be obtained by telephoning Consumer Protection on 1300 30 40 54 or by visiting website www.docep.wa.gov.au/financebrokers .

Media Contact:       
Gay McNamara       
9282 0679        
0413 032 584