MORTGAGE & FINANCE ASSOCIATION OF AUSTRALIA

ACN 006 085 552

CODE OF PRACTICE
Published 3 August 2016
Effective 4 September 2016

Key initiatives of this Code:

Members involved in credit activities must:

 comply with all applicable laws;

 maintain appropriate and relevant training standards;
 hold adequate professional indemnity insurance;
 arrange appropriate finance for customers;
 act promptly and properly in relation to the management of finance
applications;
 disclose commissions and other benefits received (brokers only);
 maintain IDR and membership of EDR schemes; and
 consider hardship applications submitted by customers in a timely and
appropriately detailed manner.

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1. Name of the Code

1.1. This Code is the MFAA Code of Practice. Capitalised words are defined at the end
of this document.

2. Objectives of the Code

2.1. The objectives of the Code are to:

a. promote and establish professional standards between Customers and

Members and between Members in the mortgage and finance industry;
b. promote commitment by Members to compliance with laws and regulations
and the spirit of those laws and regulations;
c. promote the maintenance of the high public standing of MFAA membership;
and
d. promote ethical and fair business practices.

3. Application of the Code

3.1. This Code of Practice applies to and is binding on Members who are Brokers,
Managers, Servicers, or Credit Providers (unless otherwise specified in this Code).
Clause 4 of this Code (General Standards) applies to all Members.

3.2. The Board may from time to time:

a. amend this Code;

b. prescribe that parts or all of this Code applies to one or more classes of
Member.

4. General Standards

4.1. Members must not engage in Misconduct and must be, and continue to be, of
good character and repute and a Fit and Proper person.
4.2. Members must always comply with this Code.
4.3. Members must keep up to date with and comply with all applicable laws,
regulations and practices relevant to the conduct of their business. If the
requirements of any law or regulation impose a higher standard than specified in
this Code, then such higher standard will apply. If any provision of this Code
conflicts with any law or regulation, that provision will not operate, however the
balance of the Code will apply.
4.4. Members must undertake continuing education programs recognised by the Board
and complete sufficient number of hours of Continuing Professional Development
(CPD) to maintain membership as determined by the Board from time to time.
4.5. Members must ensure that at all times they employ or otherwise engage only with
operatives who have any relevant licence or authorisation, and who have the

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 qualifications and experience necessary to deal competently and professionally
with Customers.
4.6. Members must always conduct that Member’s business in accordance with the
Constitution of the MFAA and this Code of Practice.
4.7. Members are liable for any acts or omissions of any employee or representative
that are within the scope of the employees’ or representatives’ duties or ostensible
duties.
4.8. Members must:

a. act with appropriate skill, care and diligence;

b. deal with all persons with whom they may come into contact in the course of
their professional and commercial activities in good faith;
c. not engage in any acts or omissions of a misleading or deceptive nature;
d. not engage in any acts or omissions of a dishonest or fraudulent nature;
e. ensure that their advertising is not false, misleading, deceptive, dishonest or
likely to mislead or deceive;
f. not engage in unconscionable conduct;
g. fully disclose to any Customer or potential Customer any actual, apparent or
potential conflict of interest of which a Member is or ought to be, aware, to the
extent that such a conflict of interest may reasonably concern a Customer;
h. refrain from any conduct which may embarrass, impugn, or discredit the
MFAA or bring the MFAA into disrepute; and
i. adhere to the reasonable instructions of Customers.

5. Professional Indemnity Insurance

5.1. Members who are Brokers, Mortgage Managers, or Servicers (unless, in the
opinion of the Board, they have net tangible assets that are satisfactory to cover
professional indemnity risk, in the opinion of the Board) must maintain professional
indemnity insurance:

a. of not less than $2 million for any one claim and $2 million in the aggregate;
and
b. endorsed to cover a determination made by an EDR scheme; and
c. which provides at least 12 months ‘run-off’ cover; and
d. if trust money is held, with an extension for fidelity cover of not less than
$100,000; and
e. underwritten by an insurer regulated by APRA or otherwise acceptable to the
Board; and
f. in a form approved by the Board from time to time.

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6. Contracts with Customers

6.1. Brokers are required to record the essential terms of an agreement to provide
services to a Customer. This document can be combined with the prescribed
disclosure documents under any relevant law. It is best practice to have the
agreement signed by the Customer and the Member. If an agreement is entered
into, the Member must retain a copy of the document for at least seven years after
it is made. The Member must provide the Customer with a copy of the document
upon request from the Customer.

6.2. Brokers who charge a fee for the provision of credit assistance to a Customer,
must clearly:

a. describe the nature of credit assistance to be provided for which the fee will be
charged, and
b. state the amount of the fee to be charged; and
c. specify when the fee is payable
in writing.

6.3. Members must never charge a Customer a non-refundable fee for preparation and
submission of a Credit application if the Member knows or suspects that there is
little or no chance of the application being approved, unless the Member has
completed a preliminary assessment of eligibility of the Customer and the
Customer agrees to such a fee in writing before such a preliminary assessment is
completed.

6.4. Members who represent one or a small number of Credit Providers must, before
providing credit assistance to a Customer, inform the Customer that the Customer
should rely upon the Customer’s own enquiries about the competitiveness and
appropriateness of the proposed Credit.

6.5. Members must express written terms and conditions of their services in plain
language in English. This provision does not preclude a Member from also
providing such written terms and conditions in a language/s other than English.

7. Arranging Credit

7.1. Members must suggest or recommend to Customers only Credit that Members
reasonably believe is appropriate to the needs of that Customer, after undertaking
an appropriate assessment of the Customer’s capacity to service the proposed
Credit.

7.2. Members must not receive a commission, payment or other incentive for
negotiating the refinancing of Credit for a Customer in circumstances where the
Customer does not receive a beneficial result from the refinance, except where the
Member has acted under the specific instructions of the Customer, after
appropriate advice has been given to the Customer by the Member.

7.2.1. A Customer will ordinarily not receive a beneficial result from a refinance where:

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 a. the Customer can make offset and extra payment savings under their existing
loan; or
b. the Customer cannot make offset savings under their existing loan, but the
amount of those potential savings is less than the transaction costs that will be
incurred as a result of refinancing.

7.3. Members must always disclose to Customers all relevant details known to the
Member about a proposed Credit application as and when appropriate.

7.4. Members must always make such enquiries as are reasonable in all the
circumstances to determine a Customer’s capacity to service any proposed Credit.

7.5. Members must submit a Credit application to a Credit Provider or the Credit
Provider’s representative, when practicable, within five business days (but in any
case promptly) after completion of a duly completed application, containing all
information required by the Credit Provider to assess the application.

7.6. Members dealing with Customers must always keep Customers informed, where
appropriate, of all relevant information known to Members relating to a proposed or
current Credit application.

8. Outcome of Application for Credit

8.1. Members must advise Customers of the outcome of a submitted Credit application,
whenever practicable, within two business days (but in any case promptly), of the
decision being notified in writing to the Member by the Credit Provider to which the
application was submitted.

8.2. Members must refund any amounts due to Customers, whenever practicable,
within five business days (but in any case promptly).

9. Confidentiality

9.1. Members must at all times keep information, that has been provided by a
Customer, confidential and secure and only disclose information as required by
law, the MFAA Disciplinary Rules or as authorised by the Customer.

10. Fees and Commissions Disclosure

10.1. If a commission or other benefit will or may be paid by or to a Member for, or in

connection with, provision of Credit to a customer, the Member must always
disclose to the Customer that fact and:

a. the name of the person by whom the commission or other benefit is payable;
and
b. the name of the person to whom the commission or other benefit is payable;
and
c. the amount of the commission or other benefit, if ascertainable; and

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 d. if the amount of the commission or other benefit is not ascertainable, the basis
of or formula for such commission or other benefit;

but this disclosure requirement does not apply to:

e. the amount payable in connection with a credit related insurance contract; or

f. the commission or other benefits paid to employees of the Member.

Commissions and other benefits need not be disclosed by Managers or Servicers where
the Customer is provided with the Manager’s or Servicer’s own Credit product.

11. Dispute Resolution – IDR, EDR, and the MFAA Tribunal

11.1. Members must establish IDR procedures in accordance with guidelines issued
from time to time by the MFAA. Members must make information about their IDR
scheme available to all Customers and prospective Customers.

11.2. Members must ensure that their complaints contact person has the authority to
determine and respond to any complaint made by a Customer.

11.3. Members must maintain a written IDR policy which is made available to any
person on request and posted on the Member’s website, if any.

11.4. Members must ensure that a complainant is treated courteously when making a
complaint.

11.5. Members must not impose any fee in relation to a complaint on a Customer who
makes a complaint.

11.6. Members must be a member of an EDR scheme. Members must make

information about their EDR scheme available to all Customers and prospective
Customers, and that information must be posted on the Member’s web site, if any.

11.7. Members must respond in writing to written requests from their EDR scheme
concerning a complaint promptly and in any event within 10 business days.

11.8. Members must respond in writing to written requests from the MFAA Investigation
Officer promptly and in any event within 10 business days.

11.9. Members must respond in writing to written requests from the MFAA Tribunal
promptly and in any event within ten 10 business days.

11.10. Members must respond in writing to written requests from the MFAA Membership
Secretary promptly and in any event within 10 business days.

11.11. Members must maintain a written record of written complaints made against
them and supply a copy to the Investigation Officer or MFAA Tribunal on request.

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12. Money Held on Trust

12.1. Members who receive trust money must promptly, and in any event within two
business days, deposit that money into a trust account maintained by the Member
with an authorised deposit-taking institution.

12.2. Members must promptly, and in any event within five business days, account for
any money held in trust which has become payable to third parties.

12.3. Members who hold trust money must keep such books and records that correctly
record and explain the transactions in the trust account and have the account
audited by an independent external auditor at least annually.

13. Hardship Applications

13.1. If a Member becomes aware, or is advised by a Customer, that the Customer is or

may be in financial difficulties, the Member will consider in good faith whether it is
reasonably appropriate to vary the payment terms of the credit facility, or if it is
appropriate, suggest that the Customer contact the Credit Provider and request the
Credit Provider to vary the Customer's repayment terms.

13.2. Where appropriate, the Member must:

a. have regard to the Customer’s financial circumstances and consider in good

faith and within a reasonable time the Customer’s request to vary the payment
terms; and
b. suspend any action to recover any payments due under a Credit contract and,
if it has not listed a default already, not list a credit default in respect of the
Credit facility against the Customer until:
i. the Member informs the Customer in writing whether or not it will vary the
payment terms; and
ii. if the Member and the Customer agree to vary the payment terms, the
Customer fails to meet the varied payment terms; and
c. encourage the Customer to make payments the Customer can afford, pending
the Member informing the Customer of its decision; and
d. have a documented policy and procedure in place for receiving and assessing
requests to vary credit contracts upon hardship grounds and must provide
information about that hardship policy to a Customer on request.

13.3. Members must act reasonably in assessing a Customer’s request to vary payment
terms. Amongst other things, Members must not require:

a. the Customer to apply for the early release of any part of the Customer’s
superannuation entitlements; or
b. the Customer to obtain funds from family members, friends or other third
parties;
prior to the Member considering whether to, or agreeing to, vary the payment terms.

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13.4. Members who decide to vary the payment terms must promptly and in any case
within 21 calendar days give the Customer written notice setting out particulars of
the varied payment terms.

13.5. Members who decide not to vary the payment terms must promptly and in any
case within 21 calendar days give the Customer written notice of:

a. its decision and the reasons for its decision; and

b. the Customer’s right to make a complaint to the Member’s IDR and EDR
schemes (providing contact details for those schemes) if the Credit falls within
the jurisdiction of those schemes.

14. Interpretation and Definitions

14.1. Interpretation

In this document, unless the context requires otherwise:

 clause and sub-clause headings are for reference purposes only;

 the singular includes the plural and vice versa;
 words denoting any gender include all genders;
 a reference to a person includes any other entity recognised by law and vice
versa;
 where a word or phrase is defined, its other grammatical forms have a
corresponding meaning;
 any reference to any agreement or document includes that agreement or
document as amended at any time;
 the use of the word includes or including is not to be taken as limiting the
meaning of the words preceding it;
 the expression at any time includes reference to past, present and future time
and performing any action from time to time.

14.2. Definitions

In this Code of Practice, the following words and phrases have the meanings and
references set out below:

ASIC: the Australian Securities and Investments Commission

Board: the board of directors of the MFAA from time to time
Broker: a Member when conducting the business of finance broking or
mortgage broking, but excludes Members when acting as
Mortgage Managers, Credit Providers, or Servicers

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Customer: a natural person (i.e. an individual) or a small business, that is, a
business that employs fewer than 20 people, who engages a
Member to provide services relating to the provision of Credit
Credit: financial accommodation provided to Customers, including lease
finance, hire purchase, mortgage loans, personal loans
Credit Provider: a person that provides Credit to Customers, and where the context
admits, includes Servicers and Mortgage Managers acting for
Credit Providers.
EDR: means an external dispute resolution scheme approved by ASIC
for the purposes of the National Consumer Credit Protection Act
2009 (Cth)
EDR Rules: the rules of an EDR as defined above
Fit and Proper: individuals having the necessary competence for the role/s that
they purport to or seek to perform, taking into account such
attributes as knowledge, skills, and experience and whether or not
an individual is of good fame and character, as well as attributes
such as diligence, honesty, integrity and judgement.

The criteria for determining whether a person is a Fit and Proper person includes,
but is not limited to, an assessment of whether the person has:
 appropriate knowledge, skills, experience, competence, judgment,
character, honesty and integrity;
 been subject to criticism, discipline, disqualification or removal by a
professional or regulatory body, court or relevant tribunal where such
outcome is relevant to the activities the person seeks to carry out as a
Member of the MFAA;
 been subject to adverse findings in relevant criminal or civil proceedings;
 been refused a licence or registration for a commercial or professional
activity;
 failed to manage personal debts satisfactorily;
 been a responsible officer in an entity at a time the entity failed;
 been obstructive, misleading or untruthful in dealing with a regulatory
body, or a court;
 been inappropriately critical of a relevant self-regulatory body, or tribunal;
 demonstrated a lack of willingness to comply with regulatory or
professional requirements;
 been involved in business activities that appear negligent, deceitful or
otherwise improper;
 been, or is, considered of bad repute, or
 has surrendered, lost or failed to maintain an essential qualification,
licence or requirement to be admitted to membership or to remain a
Member of the MFAA, or such qualification has been terminated,
suspended or cancelled, whether this qualification or requirement arises
under the Constitution, the Disciplinary Rules or another requirement of
the MFAA, or under law.
IDR: Internal Dispute Resolution

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Manager: a Member who manages mortgages on behalf of a Credit Provider,
including:
a. management of the relationship with the Customer throughout the term of the
Credit; and
b. undertaking some or all of the work associated with Credit assessment; and
c. whose commission or remuneration is calculated by reference to:
i. a pool of contracts for Credit in respect of which the commission is
determined by reference to the net profit of operating the pool; or
ii. the difference between:
A. the delivery rate (being the cost of funds for the pool of contracts
made available to the licensee or the credit representative); and
B. the interest rate and other income derived from the pool of
contracts; and
d. ASIC or the MFAA has not declared the Member not a Manager or not a
Manager in respect of certain transactions.
Member: a person that is a Member of the MFAA as defined in the
Constitution of the MFAA.
Membership Secretary: the Membership Secretary as defined in the Constitution of the
MFAA
MFAA: Mortgage & Finance Association of Australia ACN 006 085 552
MFAA Tribunal: the Tribunal as defined in the Constitution of the MFAA
Misconduct: a breach of this Code of Practice or conduct involving:
 fraud or dishonesty; or
 misleading or deceptive representation/s or activities; or
 knowingly making a false statement; or
 gross negligence; or
 a refusal to, or neglecting, or failure to, comply with a provision of the
Constitution, the MFAA Code of Practice, EDR Rules, the MFAA
Disciplinary Rules; or
 unreasonably failing or refusing to provide information to the Investigation
Officer; or
 misrepresentation of material facts in relation to an application for
Membership of the MFAA; or
 misrepresentation of material facts in relation to mentoring of a Member;
or
 misrepresentation of material facts, making a false statement or being
grossly negligent concerning continuing professional development hours
earned or to be earned as a Member; or
 misrepresentation of material facts, making a false statement or gross
negligence in relation to any borrower, guarantor, proposed borrower or
proposed guarantor, Credit application or Credit variation application; or
 a breach of any legislation relating to the Member’s business activities;
and:

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  which indicates a failure to understand or practice the principles of
honesty and fair dealing in relation to other participants in the mortgage
and finance industry; or
 which indicates a substantial or consistent failure to reach reasonable
standards of efficiency and competence in the conduct of business in the
mortgage and finance industry; or
 which is prejudicial to the reputation or interests of the MFAA; or
 which is described by the Board as being a failure, without reasonable
excuse, proof of which will lie on the Member, to comply with a
determination, decision or any sanction or order of the Tribunal imposed
on the Member; or
 which is unethical conduct or conduct unbecoming of a Member; or
 which the Board may in addition from time to time prescribe as
Misconduct and has been made generally known for at least one calendar
month, including publication on the MFAA website.
Servicer: a Member who is the principal servicer of Credit for a Credit
Provider, and who exercises the majority of the credit and other
decisions relating to the Credit Provider’s Credit portfolio and who
ASIC or the MFAA has not declared the Member to not be a
servicer or to not be a servicer in respect of certain transactions.

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