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BFCSA: ASIC Propaganda - they say they follow the data to expose lenders and insurers! Really? Old Dogs New tricks??

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ASIC follows the data to expose lenders and insurers

The Australian 12:00am January 3, 2018

Richard Gluyas


ASIC is deploying its vast data-collection and analytics capability showcased in last year’s review of mortgage broker remuneration as it builds up to release public reports from a range of financial services industry inquiries.

The watchdog is also expected to announce early this year that total remediation for the sale of worthless add-on insurance to car owners has surged past $100 million, after IAG-owned Swann Insurance refunded $39m to 67,000 customers last month.

ASIC senior executive for fin­ancial services Michael Saadat said the mortgage broker review had set a high water mark for data collection and analysis.

“The big change is that we are now getting very granular, transaction-level data that can be used to understand the consumer outcomes and how a market is operating,” Mr Saadat said.

“Previously we haven’t had that level of insight.”

In 2016, the Turnbull government restored $120m in four-year funding to ASIC that had been cut from the regulator in 2014.

About half the money was used to modernise outdated IT systems, with the remainder allocated to areas including the deposit takers, credit and insurers sector run by Mr Saadat. A lot of the funding was front-ended, which is likely to create challenges for ASIC in the latter years of the forward estimates.

In the past, ASIC would probe industries on an ad hoc basis and the insights from the data collected would be generic.

In the mortgage broker review, however, ASIC collected and analysed 157 data points from 1.4 million home loans. The data included the characteristics of the borrower, the loan channel, the features of the loan, the application process, commission payments and the performance of the loan.

The review recommended improvements in the standard commission model for mortgage brokers, switching from bonus commissions and soft-dollar benefits. It recommended better disclosure of mortgage broker ownership structures and more oversight of brokers by lenders and aggregators.

The reports scheduled for release by ASIC from February focus on credit card issuers, reverse mortgages, loan fraud and the direct sale of life insurance.

The inquiry into credit card ­issuers, due to report in the final quarter of 2017-18, follows a ­Senate probe of the industry two years ago that sought explanations for plastic card interest rates failing to match reductions in the cash rate.

The focus is believed to be on balance transfers and whether they lure consumers into long-term debt at high interest rates.

With reverse mortgages, ASIC is understood to have collected data on 16,000 loans to older Australians and those approaching retirement.

A report in the March quarter will look at the extent of negative equity based on forecast outcomes over 15-20 years using a number of different ­assumptions.

It will examine whether or not consumers are still likely to have sufficient equity to pay a deposit for accommodation in an aged-care facility.

ASIC has also been following up on work in October on insurance claims-handling practices for total and permanent disabilities, which found a high proportion of claims were declined or withdrawn.

On further investigation, the regulator found that TPD claims with the highest risk of rejection were those sold through the ­direct channel.

A report on the culture and conduct in direct sales and distribution of life insurance will be released in the first half of 2018.

One of the big, continuing projects from 2017 will be the crackdown on loan fraud, particularly in the home loan market, and efforts to improve industry practices.

As The Australian reported in November, ASIC is ramping up surveillance of the $1.5 trillion home lending market. It has ­individuals and a handful of large and small lenders under investigation for fabrication of documents and inadequate fraud-detection systems.

The project will be completed by September and include a report on the industry’s practices and the level of consumer harm.

The prudential regulator APRA is also participating in the review. Its main focus is the quality of processes used by lenders to detect fraud and verify loan applications.

In November, NAB said it had sacked 20 bankers and disciplined a further 32 after discovering false information had been used in applications for about 2300 home loans.

Further matters are scheduled for announcement early this year.

With the financial services royal commission cranking up in early 2018, ASIC has created an internal team to manage its interaction with the inquiry.



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