Background
In addition to general obligations, mortgage brokers in Australia have several regulatory obligations that are specific to the broker business and finance industry. These are covered by a number of ASIC regulatory guides, most notably RG203-207 (Credit licensing), RG209 (Responsible lending conduct) and RG273 (Best interests duty).
Broker compliance is monitored by licensees, who are responsible to ASIC and additionally often have additional responsibilities to maintain their lender accreditation agreements. Most frequent method of compliance monitoring and credit representative supervision is the spot audit. Spot audits are designed for a human revue of several (and not all) loan application files.
Audit AI was developed to supplement spot audit process and provide real time monitoring of credit representatives, particularly in relation to the Best interests duty (BID) regulations. It utilises de-identified application data analysis by AI tools and is a condition of deal owner proceeding to lender lodgement. Currently, Audit AI covers consumer home loan applications only, with the goal of extending it to other consumer loan applications in the near future.
What is covered by Audit AI?
Audit AI covers the following sections:
How many lenders were compared?
Was the lowest cost product recommended (out of compared)?
Did product recommendation comments meet aggregator set word count?
Do recommendation comments mention lender?
Do recommendation comments mention recommended product features?
Did the recommended product interest rate meet the target?
Were the applicant’s product requirements met?
Does the recommended product take into consideration applicant's preferences?
Was lender usage target achieved?
Were Compliance Documents supplied in the deal?
Were all broker disclosures completed?
Parameters for these questions are set out by the enterprise owners (eg. aggregator).
In addition, Audit AI offers qualitative analysis of the product recommendation, example:
Audit AI process
Lodgement tab will be locked out until Audit AI is completed.
In order to proceed to the lender lodgement, users are require to complete Audit AI.
Once Audit is run, the results will display and in some cases there will non-conformances detected. Screen could look like this:
When Audit AI results in non-conformances users have the following options:
1. Comment on the reasons why these are identified (1) and click save (3) in order to rectify non-conformances. In this case Audit AI can be repeated until all non-conformances are rectified. In order to repeat the audit, users need to complete the commentary and save Users cannot proceed to lodgement until all non conformances are rectified or checkbox is ticked (2) to proceed without rectifying all issues.
2. Comment on the reasons why these issues are identified (1), select the checkbox to proceed further (2) and click save in order to proceed to lodgement (3). In this case licensee team will receive an email with the audit results.
Audit email looks like this:
Email recipients, audit parameters and participants in Audit AI are set up by the licensee/aggregator.