Financial watchdog ASIC is hunting again

Research Houses

ASIC wants to ensure that the crop of websites that provide research and comparison facilities for investments keep any advice free from commercial influence and show how they reach their conclusions, the Sydney Morning Herald reported recently.

ASIC noted that many research houses gave poor advice in recommending bad investments such as Westpoint, Fincorp and Basis Capital, all of which cost millions of dollars of investor money. They pointed out that fund managers often make payments to such research houses, representing a “serious conflict of interest.”

Research houses are going to be asked to publish how they arrive at their conclusions as well as be open about who has paid for the” research.”

Home Loan Comparison Websites

Investment advice is not our area, as you know – LowerBills doesn’t provide that. However ASIC is also planning to review websites that compare home loans, insurance and other personal finance products, so that is very much our area.

As you may know, LowerBills already has an ASIC credit license and a Credit Ombudsman Service Limited Membership Number. It’s a good idea to check that the websites you are using for comparing loans or credit cards have similar accreditation.

As personal finance sites become more popular amongst Australians, ASIC is aware that it must keep on top of it and not allow a payments-for-ratings system to take hold of the comparison websites.

Of course personal finance sites receive commissions from the banks and financial institutions for promoting their products, but ASIC is keen to have some guidelines for this not to become open to corruption. This is a move we would support.

Mortgage Brokers in the Sights Too

ASIC is also poised to clamp down on any mortgage brokers that are not abiding by new consumer credit laws that were established in 2009, in the wake of the Global Financial Crisis.

Following a periodic ASIC review, low documentation loans came under the spotlight as this was where evidence of non-compliance was strongest – with inadequate steps being taken to verify income, ask about living expenses and to learn how the customer would make repayments for the loan.

Low doc loans are usually offered to self-employed people and they played a significant role in the subprime mortgage crisis in the US.

Brokers and lenders have a responsibility to ensure their customers can repay their loans, and must avoid lending where credit will cause financial hardship to an individual; ASIC is concerned that some are not following the letter of the law, just because a loan is labeled as “low doc.”

ASIC said that brokers and lenders alike were generally aware of the new lending obligations, but could be doing more to implement them.

A separate blog post from LowerBills will be reviewing all the changes to regulations in the credit and loan laws that have been drafted in by the federal government since the GFC. These affect your personal finances directly and are important to understand.