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Regulation Governing the Provision of Credit Assistance and Financial Advice in Australia: A Consumer's Perspective

Published online by Cambridge University Press:  01 January 2025

Gill North
Gill North*
Affiliation:
Faculty of Law, Monash University; Law School, University of Western Australia
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Abstract

Five years ago the global financial crisis threatened the world's financial system and its aftermath wreaked devastation across many parts of the globe. Mis-selling of home mortgages to consumers unable to repay their loans and global sales of financial products linked to residential lending were at the heart of the crisis. Financial reforms governing housing credit frameworks and the selling of complex financial products have ensued within domestic and international spheres. This article reviews the regulatory structures in Australia governing the provision of residential housing mortgages and credit assistance and the provision of financial advice. Its analysis focuses on customer suitability processes, client duties, and remuneration provisions because these legal features significantly influence, and can adversely impact, consumer outcomes. It suggests specific reforms to ensure adequate consumer protection and enhance the consistency and efficacy of the credit framework. It also calls for renewed debate on the remuneration structures of mortgage brokers.

Type
Article
Information
Federal Law Review , Volume 43 , Issue 3 , September 2015 , pp. 369 - 396
Copyright
Copyright © 2015 The Australian National University

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Footnotes

The author thanks Stephanie Babic, Andrew Godwin and Martin North for their valuable feedback on prior drafts of the article.

References

1 Australian Bureau of Statistics (ABS), ‘6416.0 Residential Property Price Indexes: Eight Capital Cities, September 2014’ (Media Release, 11 November 2014); ABS, ‘6523.0 Household Income and Income Distribution, Australia, 2011–12’ (16 August 2013) Table 16; Australian Prudential Regulation Authority (APRA), Prudential Practice Guide APG 223 — Residential Mortgage Lending (5 November 2014) 7. The APRA document indicates that ‘[l]ending secured by mortgages over residential property … constitutes the largest credit exposure in the Australian banking system, and for many authorised deposit institutions constitutes over half of their credit exposures.’ See also Jonathan Shapiro, ‘Exploring Australia's “Wealth Effect”’, Sydney Morning Herald (Sydney), 19 November 2014. The Shapiro article notes that 55 per cent of gross household assets in Australia are invested in housing while 27 per cent are in shares.

2 APRA, Insight Issue One 2014, 9. More than half of the APRA supervised default fund assets in 2013 were shares, with 26 per cent of the portfolios allocated to Australian shares and 25 per cent to international shares. Many Australians also hold shares outside of superannuation schemes: see Australian Securities Exchange, 2012 Australian Share Ownership Study (21 May 2013); Tim Boreham, ‘Wealthy Investors Still Like Shares’, Sydney Morning Herald (Sydney), 1 June 2013.

3 See, eg, Commonwealth of Australia, ‘Commonwealth Budget 2012–2013’ (Budget Paper No 1, Statement 2, 8 May 2012) 2.26–38 <http://www.budget.gov.au/2012-13/content/bp1/download/bp1.pdf>.

4 Bill Shorten, Minister for Financial Services and Superannuation, Commonwealth Government, ‘New Consumer Credit Protections Introduced into Parliament’ (Media Release, No 133, 21 September 2011) <http://ministers.treasury.gov.au/DisplayDocs.aspx?doc=pressreleases/2011/133.htm&pageID=003&min=brs&Year=&DocType=>.

5 Mortgage credit secured on residential property is at record levels in Australia, raising concerns at many levels. See APRA, ‘APRA Outlines Further Steps to Reinforce Sound Residential Mortgage Lending Practices’ (Media Release, 9 December 2014); Australian Securities and Investment Commission (ASIC), ‘ASIC to Investigate Interest-Only Loans’ (Media Release, 14-329MR, 9 December 2014); Financial System Inquiry, FSI Final Report (November 2014) 34, 35, 42, 47, 51; International Monetary Fund, ‘Financial Sector Assessment Program Update: Australia Basel Core Principles for Effective Banking Supervision — Detailed Assessment of Observance’ (Country Report No 12/313, Monetary and Capital Markets Department, November 2012) 7 <https://www.imf.org/external/pubs/ft/scr/2012/cr12313.pdf>. See also Georgia Wilkins, ‘House Price Boom Must End, Says David Gonski’, Sydney Morning Herald (Sydney), 3 September 2014; Gareth Hutchens and James Eyers, ‘Reserve Bank Sends Mortgage-Pressure Warning to Home Owners, Sydney Morning Herald (Sydney), 7 November 2014; Jonathan Shapiro and Clancy Yeates, ‘Fears Australian Banks Ill-Prepared for Housing-Induced Crisis’, Sydney Morning Herald (Sydney), 24 November 2014.

6 International Monetary Fund, ‘Financial Stress and Deleveraging Macrofinancial Implications and Policy’ (Global Financial Stability Report, International Monetary Fund, October 2008) 6 <https://www.imf.org/external/pubs/ft/gfsr/2008/02/pdf/text.pdf>.

7 See, eg, The Financial Crisis Inquiry Commission, ‘The Financial Crisis Inquiry Report: Final Report of the National Commission on the Causes of The Financial and Economic Crisis in the United States’ (Report, Financial Crisis Inquiry Commission, January 2011) xvii-xx <http://www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf>; Stijn Claessens, Zoltan Pozsar, Lev Ratnovski, and Manmohan Singh, ‘Shadow Banking: Economics and Policy Staff’ (Staff Discussion Note, International Monetary Fund, December 4, 2012) 9 <https://www.imf.org/external/pubs/ft/sdn/2012/sdn1212.pdf>.

8 International Monetary Fund, above n 6, 6–10; Stijn Claessens et al, ‘Crisis Management and Resolution: Early Lessons From the Financial Crisis’ (Staff Discussion Note, International Monetary Fund, 9 March 2011) 4–7 <https://www.imf.org/external/pubs/ft/sdn/2011/sdn1105.pdf>.

9 See, eg, Claessens, above n 8, 14–15.

10 The Joint Forum (Basel Committee on Banking Supervision, International Organization of Securities Commissions, International Association of Insurance Supervisors), Review of the Differentiated Nature and Scope of Financial Regulation: Key Issues and Recommendations (January 2010) <https://www.iosco.org/library/pubdocs/pdf/IOSCOPD315.pdf>.

11 Financial Stability Board (FSB), Thematic Review on Mortgage Underwriting and Origination Practices Peer Review Report (17 March 2011). Mortgage underwriting concerns the processes lenders use to evaluate loan applications, including the risks of offering a mortgage loan to a particular borrower.

12 FSB, ‘FSB Principles for Sound Residential Mortgage Underwriting Practices’ (Consultation Paper, 26 October 2011).

13 Ibid 1.

14 Ibid 2–9.

15 FSB, Consumer Finance Protection with a Particular Focus on Credit (Report, Financial Stability Board, 26 October 2011) <http://www.housingfinance.org/uploads/Publicationsmanager/FSB%20Principles%20on%20Consumer%20Finance%20Protection%20with%20particular%20focus%20on%20credit.pdf>.

16 Ibid 3.

17 Ibid 6.

18 Ibid 14.

19 Basel Committee on Banking Supervision, ‘Mortgage Insurance: Market Structure, Underwriting Cycle and Policy Implications’ (Joint Forum Report, Basel Committee on Banking Supervision, August 2013) <http://www.bis.org/publ/joint33.pdf>.

20 FSB, above n 15, 2.

21 Ibid 8–11.

22 Gemworth Ltd, ‘Lenders Mortgage Insurance Underwriting Policy, Product Parameters and Management Guidelines Australia’ (Policy Document, Genworth, October 2014) 6 <http://www.genworth.com.au/docs/underwriting-policy/underwriting-policy-(australia)-lmiupa1014-(clean)-v1-0.pdf?Status=Master>. Lenders mortgage insurance (LMI) was introduced in Australia in 1965 to allow first time buyers to obtain a mortgage with less than a 20 per cent deposit.

23 See, eg, Your Mortgage, Genworth Lenders Mortgage Insurance Premium Estimator (2015) <http://www.yourmortgage.com.au/calculators/mortgage_insurance/result/?sid=1913792-mndxe-mortgage_insurance>.

24 Calculated using the online calculation estimator on the ‘Your Mortgage’ website (referenced in the prior footnote) on 9 November 2014.

25 International Organization of Securities Commissions, Guidelines for the Regulation of Conflicts of Interest Facing Market Intermediaries (Report, Emerging Markets Committee, 25 November 2010) 3 <http://awareness.sca.ae/Arabic/IntReports/Report_2010_11.pdf>.

26 Ibid.

27 Ibid 12.

28 International Organization of Securities Commissions, Suitability Requirements with Respect to the Distribution of Complex Financial Products (January 2013) <https://www.iosco.org/library/pubdocs/pdf/IOSCOPD400.pdf>. See also Australian Securities and Investments Commission, ‘Regulating Complex Products’ (Report No 384, January 2014) <http://download.asic.gov.au/media/1344500/rep384-published-31-January-2014.pdf>.

29 Ibid 6.

30 Ibid 17.

31 Ibid 19.

32 Ibid 17.

33 The Uniform Consumer Credit Code (‘UCCC’) was enacted initially as the Consumer Credit (Queensland) Act 1994 (Qld). Equivalent legislation was then passed by other States and Territories. The UCCC scheme operated from 1996 until the commencement of the National Consumer Credit Protection Act 2009 (Cth) (‘NCCP’).

34 Mortgage brokers must be licensed under the NCCP as credit assistance providers.

35 The second phase of the reforms included measures to protect consumers in new credit categories including reverse mortgages, short-term loans, and consumer leases. Detailed discussion of these provisions is beyond the scope of this article.

36 NCC ss 5(1)(a), 5(1)(b)(i) in sch 1 of the NCCP.

37 Ibid ss 5(1)(b)(ii), 5(1)(b)(iii). ‘Residential property’ is defined in s 204.

38 The purchase of shares may fall within the term ‘personal, domestic or household purposes’.

39 The NCC increased the maximum threshold for application of the hardship provisions from $312 400 to $500 000 and it introduced a power for the threshold to be raised as required. The concept of hardship is discussed further below.

40 Consumer Credit and Corporations Legislation Amendment (Enhancements) Act 2012 (Cth). The amendments were made to the NCCP.

41 NCCP pt 3.1.

42 Ibid pt 3.2. See Taylor, Bruce, ‘New National Responsible Lending Obligations – Pt 1’ (2011) 39 Australian Business Law Review 464Google Scholar; Taylor, Bruce, ‘New National Responsible Lending Obligations - Pt 2’ (2012) 40 Australian Business Law Review 43.Google Scholar

43 Explanatory Memorandum, National Consumer Credit Protection Bill 2009 (Cth) [3.16].

44 Ibid [3.11].

45 Ibid [3.16].

46 See, eg, Martin North, ‘Brokers Ride the Waves’ on Digital Finance Analytics Blog (2 December 2013) <http://www.digitalfinanceanalytics.com/blog/brokers-ride-the-wave/>. See also APRA, Quarterly Authorised Deposit-taking Institution Property Exposures June 2015 (released 25 August 2015). The APRA data indicates that 47.7% of the loans issued by authorised deposit institution in Australia as at June 2015 were originated by third parties (based on the value of loans written).

47 NCCP ss 115–16.

48 Ibid s 117. When a licensee verifies the consumer's financial position, they must obtain and consider account statements that cover at least the prior 90 days.

49 Ibid s 131(3).

50 Ibid ss 118–19.

51 Ibid s 133AA.

52 Ibid s 133AB.

53 Ibid s 126.

54 Ibid s 130.

55 Ibid s 130(1)(b).

56 Ibid s 130(1)(c).

57 Ibid s 130(1)(c).

58 Ibid s 131(1).

59 [2014] FCA 926.

60 Ibid [1]. The phrase ‘payday loans’ is commonly used by commentators in relation to short term, low value loans that may require repayment on paydays. This phrase is not a statutory term. The NCCP uses the terms ‘short-term credit contract’ and ‘small amount credit contracts’ (SACCs). The definition of these terms is provided in s 5 as follows:

1/ short-term credit contract:

a credit contract is a short-term credit contract if:

(a) the contract is not a continuing credit contract; and

(b) the credit provider under the contract is not an ADI; and

(c) the credit limit of the contract is $2,000 (or such other amount as is prescribed by the regulations) or less; and

(d) the term of the contract is 15 days or less; and

(e) the contract meets any other requirements prescribed by the regulations.

2/ small amount credit contract:

a credit contract is a small amount credit contract if:

(a) the contract is not a continuing credit contract; and

(b) the credit provider under the contract is not an ADI; and

(c) the credit limit of the contract is $2,000 (or such other amount as is prescribed by the regulations) or less; and

(d) the term of the contract is at least 16 days but not longer than 1 year (or such other number of years as is prescribed by the regulations); and

(e) the debtor's obligations under the contract are not, and will not be, secured; and

(f) the contract meets any other requirements prescribed by the regulations.

The effectiveness of the law relating to SACCs is currently under review: ‘Review of the Small Amount Credit Contract Laws’ (Consultation Paper, September 2015) <http://consumercredit.treasury.gov.au/content/sacc_consultation.asp>. The author has made a submission to this review, which is supported by jointly conducted empirical research and analysis on the use of SACCs by Australian consumers: Martin North, ‘The Stressed Household Finance Report’ on Digital Finance Analytics Blog (16 October 2015) <http://www.digitalfinanceanalytics.com/blog/the-stressed-household-finance-report-2015-is-available/>.

61 ASIC v The Cash Store Pty Ltd (in liq) [2014] FCA 926 [36].

62 Ibid [43].

63 Ibid [42].

64 Ibid [66]. AFA also breached multiple sections of the NCCP. TCS was found to have been ‘involved in’ these contraventions and thereby contravened these provisions also. In addition, TCS breached s 12CB of the ASIC Act and engaged in unconscionable conduct in relation to the selling of payment protection insurance to customers.

65 ASIC, Regulatory Guide 209 Credit Licensing: Responsible Lending Conduct (November 2014) <http://download.asic.gov.au/media/2243019/rg209-published-5-november-2014.pdf>.

66 Ibid 12–14.

67 Ibid 15–17.

68 Ibid 20–3.

69 Ibid 17–19.

70 [2014] FCA 926.

71 ASIC, above n 65, 18.

72 Ibid 44.

73 Ibid 47–8.

74 Ibid 21–2.

75 Ibid 22.

76 Ibid 37.

77 As explained previously, the term ‘substantial hardship’ is not defined in the NCCP, but is presumed to occur if the consumer can only make the repayment by selling his or her principal place of residence: NCCP s 131(3).

78 Ibid 36.

79 APRA, Prudential Practice Guide APG 223 – Residential Mortgage Lending (5 November 2014) 13 <http://www.apra.gov.au/adi/PrudentialFramework/Documents/20141103-APG-223.pdf>.

80 Financial System Inquiry, above n 5, 5, 51. As the Final Report notes, financial crises are costly to individuals through the immediate effects of asset price declines, as well as the more significant negative consequences linked to economic downturns which typically accompany such crises, including unemployment and reduced savings. This article was submitted for publication at the end of 2014. Since then, APRA and ASIC have both (somewhat belatedly) focused on risks associated with residential housing investment. See, for example, Wayne Bryes, ‘Sound Lending Standards and Adequate Capital: Preconditions for Long-Term Success’ (Speech delivered at Council of Business Australia Chief Executive Officer and Director Forum, Sydney, 13 May 2015) <http://www.apra.gov.au/Speeches/Pages/Sound-Lending-Standards-and-Adequate-Capital.aspx>. Bryes confirms in this speech that the ‘current environment for housing lenders is characterised by heightened levels of risk, reflecting a combination of historically low interest rates, high household debt, subdued income growth, unemployment that has drifted higher, significant house price growth, and strong competitive pressures.’ Further, he indicates that only about half of the authorised deposit institutions (ADIs) surveyed by APRA in early 2015 were applying any form of interest rate buffer to a borrower's existing debts and to new debts when assessing property investment loan applications. Moreover, a majority of the ADI's surveyed were providing interest only loans without taking the borrower's ability to service the principal and interest of the loan during the life of the loan. APRA is now providing stricter guidance to ADIs in relation to growth in lending for residential property investment and the standards applied to these loans.

81 NCCP ss 120, 132.

82 ASIC, above n 65, 50 [143]–[146].

83 Mortgage aggregators act as a wholesaler between lenders and mortgage brokers. See, eg, Mortgage and Finance Association of Australia, Mortgage Aggregators Explained (3 April 2014) Mortgage Broker Training <http://www.brokertraining.com.au/industry-guides/42-generalguides/99-aggregators-explained.html>.

84 APRA, above n 79, 10 [17].

85 See, eg, Mortgage Choice Limited, ‘Half Year Results Ending 31 December 2013’ (Interim Financial Results Presentation Media Release, 26 February 2014) 11 <http://www.mortgagechoice.com.au/media/2726097/MOC%20ASX%20Presentation%20and%20Media%20-%2031%20December%202013.pdf>. Page 15 of the presentation provides a chart of the proportion of mortgages in Australia provided by the four largest banks during 2012–13 that were initiated through mortgage brokers.

86 See, eg, Martin North, ‘Mortgage Brokers Day in the Sun’ on Digital Finance Analytics Blog (19 January 2014) <http://www.digitalfinanceanalytics.com/blog/mortgage-brokers-day-in-the-sun/>.

87 Ibid.

88 Ibid.

89 Ibid.

90 See James Eyers and Clancy Yeates, ‘‘Big Banks’ Brand Games Under the Spotlight’, Sydney Morning Herald (Sydney), 29 August 2014.

91 Financial System Inquiry, above n 5, 271. The Final Report confirms that consumers often do not understand their mortgage broker's associations with product issuers. Many consumers who were surveyed believed that entities owned by a large financial institution (but operating under a different brand name) were independent.

92 NCCP s 121(2).

93 Corporations Act 2001 (Cth) (‘CA’) ss 761G–GA.

94 Ibid s 764A. Examples of financial products specifically included are derivatives, superannuation interests, and a margin lending facility.

95 Ibid s 765A.

96 Corporations Regulations 2001 (Cth) reg 7.1.06(3) defines ‘credit’ as ‘a contract, arrangement or understanding under which payment of a debt owed by one person (a debtor) to another person (a credit provider) is deferred; or one person (a debtor) incurs a deferred debt to another person (a credit provider)’, including any form of financial accommodation, financial benefits arising from (or as a result of) a loan, drawing, accepting, indorsing or otherwise dealing in a negotiable instrument, and a letter of credit.

97 CA s 762C. The meaning of ‘facility’ in Division 3 includes: intangible property; an arrangement or a term of arrangement (including a term that is implied by law or that is required by law to be included); or a combination of intangible property and an arrangement or term of an arrangement.

98 Ibid ss 763A–D.

99 Ibid ss 766A(1)(a), 766B.

100 Ibid ss 766A(1)b), 766C.

101 Ibid s 766B.

102 Ibid s 766B(3).

103 Ibid s 766B(4).

104 Ibid s 949A.

105 Corporations Legislation Amendment (Financial Services Modernisation) Act 2009 (Cth).

106 Treasury, National Credit Reform Enhancing Confidence and Fairness in Australia's Credit Law (Green Paper, July 2010) 49.

107 PJC, Inquiry into Financial Products and Services in Australia (November 2009).

108 Ibid 14 [2.31].

109 CA s 764A(1)(l).

110 Corporations Legislation Amendment (Financial Services Modernisation) Act 2009 (Cth). Division 4A of Pt 7.8 does not apply to margin lending facilities in amounts equal to or greater than $500 000.

111 CA ss 985G.

112 Ibid ss 985E, 985H, 985K.

113 Ibid s 985H.

114 ASIC, Regulatory Guidance Note 219: Non-standard Margin Lending Facilities: Disclosure to Investors (November 2010) 8–12.

115 CA s 985J.

116 A share portfolio can be constructed by means of an index fund or an Exchange-Traded Fund (ETF), so sophisticated investment skills are not required. An ETF is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.

117 PJC, above n 107, 110 [6.28].

118 For further discussion, see Corones, Stephen and Galloway, Thomas, ‘The Effectiveness of the Best Interests Duty – Enhancing Consumer Protection’ (2013) 41 Australian Business Law Review 5Google Scholar; North, Gill ‘Financial Advice Reforms: Striking the Right Balance’ in Griffiths, Shelley, McCracken, Sheelagh and Wardrop, Ann (eds), Exploring Tensions in Finance Law: Trans-Tasman Insights (Thomson Reuters, 2014)Google Scholar; North, Gill, ‘The Future of Financial Advice Reforms: Will They Achieve Their Long Term Objectives?’ (2015) 22 Competition and Consumer Law Journal 197.Google Scholar

119 CA pt 7.7A div 2. See ASIC, Regulation Impact Statement, Future of Financial Advice: Best Interests Duty and Related Obligations (December 2012).

120 CA pt 7.7A div 3.

121 Ibid pt 7.7A div 4.

122 Ibid pt 7.7A div 5.

123 Section 915C(aa) of the CA enables ASIC to suspend or cancel the license of a person when it has reason to believe that the licensee is likely to contravene their obligations under s 912A. Section 912A provides the general obligations of a financial services licensee.

124 CA s 960A.

125 The duties and obligations mandated in pt 7.7A should not be characterised or described as ‘fiduciary duties’ because these statutory provisions explicitly require a person providing financial advice to follow specified steps and they explicitly prohibit various forms of remuneration regardless of any informed consent by a client. See Lindgren, Kevin, ‘Fiduciary Duty and the Ripoll Report’ (2010) 28 Company and Securities Law Journal 435Google Scholar; Craddock, Gerard, ‘The Ripoll Committee Recommendation for a Fiduciary Duty in the Broader Regulatory Context’ (2012) 30 Company and Securities Law Journal 216Google Scholar; Hanrahan, Pamela, ‘The Relationship between Equitable and Statutory “Best Interest” Obligations in Financial Services Law’ (2013) 7 Journal of Equity 46.Google Scholar

126 See, eg, ASIC, Regulatory Guide 175: Licensing: Financial Product Advisers — Conduct and Disclosure (October 2013) 8, 67 <http://download.asic.gov.au/media/1240967/rg175-published-3-october-2013.pdf>.

127 CA s 961B(2)(a)–(c).

128 Ibid sub-s (d).

129 Ibid sub-s (e). See also s 4961D.

130 Ibid sub-ss (f)–(g).

131 Ibid s 961E.

132 Ibid s 961H.

133 Ibid s 961J. Section 961J(1) does not apply when the subject matter of the advice is a basic banking product or a general insurance product.

134 Explanatory Statement, Select Legislative Instrument No 102, 2014 Attachment C, 1.

135 Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 (Cth).

136 Corporations Amendment (Streamlining of Future of Financial Advice) Regulation 2014 (Cth). The Regulation made the following changes: broadening the circumstances when the grandfathering arrangements for the ban on conflicted remuneration apply; clarifying that benefits can be paid under a balanced scorecard arrangement; clarifying that bonuses paid in relation to ‘permissible revenue’ are not conflicted remuneration; clarifying the application of the stamping fee provision to capital raising activities and broadening its application to include investment entities; amending the application of the existing brokerage fee provisions to include brokerage fees paid in relation to financial products traded on the ASX24; ensuring that the wholesale and retail client distinction that currently applies in other parts of the Act also applies in respect of the FOFA provisions; and clarifying the operation of the ‘mixed benefits’ provisions. In addition, the Regulation makes the following changes on an interim basis: removing the need for clients to renew their ongoing fee arrangement with their adviser every two years (also known as the ‘opt-in’ requirement); removing the requirement to provide an annual fee disclosure statement to clients in ongoing fee arrangements; removing the ‘catch-all’ provision from the list of steps an advice provider may take to satisfy the best interests obligation, and facilitating scaled advice; clarifying the treatment of ‘intra-fund advice’; and amending the application of the ban on conflicted remuneration including: providing that benefits relating to general advice are not conflicted, subject to certain conditions; amending the execution-only services provision; clarifying the application of the existing client-pays provision; broadening the training and education provision; and broadening the basic banking products provision: Explanatory Statement, Select Legislative Instrument No 102, 2014 1–2.

137 Since November 2014, the Coalition and Labor Party have agreed and enacted some amendments to the FOFA regime but these do not materially alter the best interests provisions.

138 APRA, above n 79, 11.

139 Ibid 12.

140 CA s 961J. Section 961J(1) does not apply when the subject matter of the advice is a basic banking product or a general insurance product.

141 Ibid s 961D.

142 CA pt 7.7 div 3.

143 Ibid pt 7.9 div 2. See also CA pt 7.7 div 2. Division 2 mandates that a person provided with financial service as a retail client must be given a financial services guide, generally before the financial service is provided.

144 See Duncan Hughes, ‘The True Cost of “Free” Mortgage Advice’, Australian Financial Review (Sydney), 29 November 2014.

145 CA ss 963E–964K.

146 APRA, above n 79, 10.

147 Ibid.

148 Ibid 19. APRA acknowledges that the use of LMI does not mitigate all of the risks of mortgages with high loan to valuation ratios.

149 For example, many websites, including those of mortgage brokers, highlight the benefits of negative gearing without discussing the associated risks.

150 APRA, above n 79, 12, 14.

151 Ibid 11. APRA notes that a prudent credit provider would have regard to the impact of changes in interest rates, house prices and house supply and demand on the mortgage portfolio, reflecting APRA's concerns with the entity's prudential health.

152 In modern digital environments, there are many public sources that consumers can use to compare available credit and financial services and products. The extent to which publically available information enables consumers to make informed and confident choices, either on an independent basis or with advisory assistance, depends on many factors.

153 See, eg, Shane Oliver, The Experts — Shares, Property, Bonds or Cash? (31 January 2013) Switzer <http://www.switzer.com.au/the-experts/shane-oliver/shares-property-bonds-or-cash/>; John Collett, ‘Returns of the Decade’ Sydney Morning Herald (online), 6 February 2013, <http://www.smh.com.au/money/investing/returns-of-the-decade-20130205-2dvgm.html>; Alan Mattich, ‘Equities for the Long Run? Or Property? Or Neither?’ Wall Street Journal (online), 2 April 2014, <http://blogs.wsj.com/moneybeat/2014/04/02/equities-for-the-long-run-or-property-or-neither/>. Asset class performance comparisons vary by period, country and calculation methodology.

154 See, eg, McCracken, Sheelagh et al, Banking and Financial Institutions Law (Lawbook Co, 8th ed, 2013) 50.Google Scholar

155 Monies invested in corporate shares can be lost when the relevant companies fail, but this risk can be mitigated by holding a diversified portfolio. Much of the value of an individual residential property can also be lost in catastrophes such as fires and floods, but this can be mitigated by insurance.

156 Discussion of comparative regulation in other jurisdictions is beyond the scope of this article.