ASIC defers several mortgage projects amid COVID-19

Following on from announcements that the regulators would temporarily change their regulatory work and priorities to allow them to focus on the impact of COVID-19, ASIC has now provided details on which activities will be affected.

These activities include the deferral of some activities “not immediately necessary in light of these significantly changed circumstances, including consultations, regulatory reports and reviews” and the redeployment of staff to address issues of immediate concern, including “maintaining the integrity of markets and protecting vulnerable consumers”.

Enforcement action will continue. However, ASIC said that there may be some changes to the timing and process of investigations to take into account the impact of COVID-19. 

It elaborated: “Onsite supervisory work, such as the enhanced approach of ASIC’s Close and Continuous Monitoring Program, is now not possible. However, ASIC will continue to monitor firms remotely, including through close working and information sharing arrangements with APRA. 

“We will also continue to draw on established working arrangements with senior executives to both supervise and support firms.”

ASIC has not made any update on when it will release the final guidance about the new best interests duty for mortgage brokers. Following the release of the draft guidance earlier this year – and the consultation on that document, which closed last month – the regulator said the final version would be released “before the obligations commence on 1 July 2020”. 

While it has been largely expected that this final guidance will be released in May, several industry heads have been calling on the government to delay the implementation of BID given the ongoing coronavirus pandemic and challenges relating to training and implementation.

ASIC has stated that it “will provide further advice on changes to ASIC work implementing the recommendations of the financial services royal commission in light of changes to the parliamentary timetable and any future government decisions on those measures”, in due course.

Affected mortgage projects

Among the many projects being deferred by ASIC are several relating to mortgages and loans.

While ASIC commenced a review of lender responses to consumers experiencing financial difficulty last year (by commissioning consumer research that examines the experiences of consumers engaging with credit providers about their financial difficulties), the regulator has said it will now defer the next stage of this work until 30 September 2020.

“Instead, ASIC will actively engage with stakeholders on financial difficulty, in particular around hardship requests resulting from the impact of COVID-19. The learning from our work to date will inform our stakeholder engagement,” it said.

For its scoping review of residential mortgage guarantees and co-debtor loans, ASIC has said it will continue to “monitor developments and analyse the information it has already received”, but it will be “deferring the collection of further data for the purposes of this work”.

Likewise, ASIC said it will continue its analysis of the pilot data received for its collection of recurrent mortgage data (which aims to help ASIC identify trends and systemic practices in Australia’s home lending market, which have the potential to cause significant consumer detriment), but is “deferring its industry engagement activities until further notice”.

The regulator also confirmed that it will continue to receive and assess applications for credit licences, Australian financial services licences and audit-related professional registrations and is “seeking additional information on how applicants will manage their obligations due to the changed operating environment in light of COVID-19”.

Decision is ‘not an abrogation of regulatory work’: ASIC chair

Commenting on the changes, ASIC chair James Shipton said: “ASIC recognises that participants in the Australian financial services sector are under enormous strain due to the effects of COVID-19. We also acknowledge that they are taking special measures to support their customers who are adversely affected. We expect them to continue to act fairly and in the best interests of consumers in these extraordinary times.

“To assist firms, ASIC will limit the regulatory activity that they will need to respond to as much as possible. We are also working with the financial industry to identify other areas where we can provide support.

“However, it is important to note that this is not an abrogation of our regulatory work, but a recognition that some existing activities and new tasks must take precedence over work we would otherwise be doing.

“In fact, COVID-19 has increased the workload of our organisation as there is a heightened risk of significant consumer harm, the possibility of serious breaches of the financial services laws, and challenges in ensuring market integrity and the continued funding of companies and the economy,” he said.

“ASIC is being especially vigilant in addressing predatory practices, scams and fraud,” Mr Shipton added.

ASIC said it expects entities to “treat customers fairly, avoid adding further financial harm or burden to consumers, and act to maintain the integrity and efficiency of markets” and for credit licensees, financial services licensees and participants in financial services markets to continue to adhere to their legal obligations.

[Related: Regulators to consider easing lending ‘impediments’]