New protocol enables aggregators to obtain references on mortgage broker licensees and licensees' representatives
The Mortgage & Finance Association of Australia (MFAA) has welcomed recent legislative changes that enhance reference checking for mortgage brokers who switch licensees.
This follows an announcement by the Australian Securities and Investments Commission (ASIC) that its updated reference checking and information sharing protocol will now include aggregators in the process, even when they are not the broker’s licensee.
The 2024 protocol will allow mortgage broking intermediaries, such as aggregators, to obtain references on mortgage broker licensees and their representatives. It introduces new provisions enabling all licensees to request references from a broker's current or former aggregator.
According to ASIC, the updated protocol will take effect today, August 20, replacing the previous version from 2021. The updated protocol also includes a transitional period until February 28, 2025, during which time licensees can use either the 2021 or 2024 template forms for reference checks.
The protocol, originally introduced in 2021 following the Royal Commission, was designed to mitigate misconduct risks. However, it initially limited participation to licensees, excluding aggregators in many cases where brokers held their own licenses.
MFAA chief executive Anja Pannek (pictured above) highlighted this gap, noting that the exclusion of aggregators had left the protocol incomplete.
“Licensees were required to conduct a reference check before accrediting or onboarding a broker, but this process was restricted to information sharing between licensees only,” Pannek said. “Given that many brokers hold their own licenses, this meant aggregators were excluded from the process in a large number of cases, a clear gap in the protocol.”
The MFAA had consistently advocated for the inclusion of aggregators in the reference checking process. The association’s efforts included submissions supporting the protocol’s expansion, such as in its 2023-24 pre-budget submission.
According to Pannek, expanding the protocol will streamline the broker accreditation process, making it more robust and holistic.
“This change means Australian borrowers can have even more trust and confidence in the broker industry,” she said.
The MFAA also anticipates that the updated protocol will render letters of separation, also known as exit letters, obsolete. Pannek described these letters as an outdated practice from a time when there was no formal regulation for checking a broker’s background. With the new, comprehensive reference checking regime, she believes such letters are no longer necessary.
In conjunction with these changes, the MFAA has been working with major aggregator and lender members through its Accreditations Working Group to develop a simple accreditation form for brokers transitioning between aggregators. This form will be available on the MFAA website.
Additionally, the MFAA’s reference checking and information sharing online learning module has been updated to reflect the changes, including new case studies to help brokers understand the process if they choose to change licensees.
What do you think of ASIC's changes to reference checking for brokers? Comment below
