To which court do we go?

There is a balance to be struck between market efficiency, operational convenience and consumer protection. Using the forum selection issue discussed here, explore the legal process involved in striking that balance. Take on the roles of different actors in this scenario and decide whether the approach to compliance meets expectations or falls through the cracks.

Engage in a scenario that tackles a real-world situation and examine the roles of law maker, regulator, credit provider, consumer, investor and lawyers working with the constraints and expectations of each of these market participants.

Whether you work in banking or consumer advocacy, or you are an interested outsider, this scenario asks whether dominant market participants, who issue standard form contracts, should be expected to create terms that comply with the law (as it stands on the date the contract is created). This scenario focuses on one clause that is found in the back of many contracts. The consumer law constrains contractual freedom to set the venue component of this clause. Take a look and see if you think this lender is flouting the law.

Setup

Outline

Each character is distinct and motivated. In this policy meets practice scenario participants navigate the decisions that they are being asked to make. This scenario has 10 roles. It can be completed in 90 minutes. Adding a facilitator might help to coordinate interactions.

The central question is whether the forum selection clauses in standard consumer home loan contracts comply with Regulation 36? We’re testing how responsibility spreads across actors, where assumptions creep in, and whether qualifications get disclosed at each hand-off, so that decisions to accept risk, are informed with these disclosures.

Objectives

Role playing in real world scenarios can provide a way for participants to experience what the work involved in a particular role entails. This exercise is about how decisions are made within each of those roles, and how those decisions are reflected in the legal products that are used for common interactions between dominant market participants and their customers.

This scenario shows how legal responsibility spreads across actors, where pressure to bury compliance failures might arise and how proxies for trust might be weak indicators of that measure.

The backstory

In September 2025, ANZ agreed to a settlement with ASIC for claims which involve 'ripping off' consumers and government, and other conduct which ASIC described as 'grubby'. ANZ is reported to have ignored consumer hardship requests, among other trust-busting misconduct.

Mortgages R Us has seen the reporting. Its CEO has just been appointed to the board of the Australian Banking Association.

In representing the interests of the banks and other credit providers, the ABA is looking to improve the regulatory environment for its members, so as to encourage more innovation. Red tape, bureaucratic controls and investigations are holding the ABA members back from investing in innovation. These banks want to compete with the fintechs, the crypto-kings and the tokenizers and they want to free up the controls so they can invest more in the frontier of finance. The ABA insists that self-regulation is adequate to meet consumer standards and expectations. Its members are confident that performance has much improved since The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (2017) and that the supervisory role of the regulator can be relaxed.

In the last meeting, the ABA gave a presentation outlining the significant investments made into governance standards. The cost of law firm fees incurred in connection with this effort, including the advice on the products in issue were reported. Those costs are presented to support the claim that the responsibility for compliance has been taken seriously and to show that the expert lawyers who the market acknowledges as capable, independent and expert in these fields have guided and endorsed the products and transactions in which these banks engage.

The CEO of Mortgages R Us noticed tension in the room when the ABA advanced its proposal. The concern that the focus on growth may have led to some profit oriented initiatives being prioritised over the investment in good governance has led to Mortgages R Us undertaking a project to assess its internal governance position before the next round of lobbying talks with the government.

The characters

Participants take on the role of characters who can strategically, procedurally or empathetically build or break trust, yield efficiencies or balance risk and reward as they engage with the practicalities of legal compliance (or avoidance).

Bowy - the Minister for Financial Services

Bowy is being lobbied by the Australian Banking Association. It's a powerful lobby group, led by a former member of the opposition party. Arrogance in the last round of talks has put a bee in Bowy's bonnet. Any resistance to the ABA's innovation campaign will need to be careful and measured by reference to demonstrated indicators of capacity or incapacity for self-regulation.

Bowy has asked his team to identify any indicators of abuse of the dominant position these banks hold, in their dealings with consumers.

The initial scene opens with Bowy inviting the ABA to a meeting. The last one ended with some heavy flexing by the banks. ABA members have been informed that the meeting is to discuss the standard form contracts for home loans. Bowy mentioned that his team is conducting a review for contracting on terms designed to avoid the effect of the consumer law (see the legislative overview below).

Leila - Bowy's policy adviser

Leila works the angles. Motivated by the examples of the role of the postal service in taking down the mafia, breaking the Unabomber case, and more, she knows that power resides in quiet corners of the law. The use of these levers doesn't make for fancy headlines, but they can be utilised to get results.

Having read the Act and the Regulations, top to bottom, a couple of questions come to mind. The volume of home loan credit contracts and mortgages processed by these lobbyists is significant. The penalty for contracting out would be record breaking if the venue regulation were being ignored, but the decision to flout this law might suggest a conscious intention to prioritise convenience over compliance.

If the lenders issue standard terms that are unlawful, Leila considers whether it is reasonable to allow them to rely on severing clauses to evade liability for contracting out (in prohibition of the Act). Should market participants who seek increased self-regulation and less red-tape, be expected to be capable of producing lawful terms (as at the date the terms are issued)? It's one thing to allow for changes in law that might render a clause unlawful, but another to start from an unlawful position. Leila wants to clarify the legal position in order to frame this review so that Bowy can decide whether to make use of it in the next meeting with the ABA in further discussions around the approach to self-regulation.

The prohibition in subsection 334(1) of the Act applies to render any provision of a contract that attempts to avoid the effect of the Act, as void. The penalty in subsection 334(3) applies where the contract is void by reason of a prohibition of subection 334(1). If the offending clause is void, but the remainder of the contract survives (as is expected by section 333 of the Act, and the severance clauses incorporated in most standard terms), perhaps there is an argument to suggest that no penalty will apply. It's possibile that the legislators intended that a pentaly should apply where the clause that is void for statutory illegality would need to be sufficiently material to the contract to make severance impossible (rendering the entire agreement void). Or - it might be clumsy legislative drafting.

The freedom to contract on the subject of venue for proceedings relating to consumer credit has been constrained by Regulation 36(3).

Leila has requested that ASIC provide an update to the Minister, to advise of any review of the home loan providers' standard form contracts, along with any consumer complaints relating to venue that might have been made to ASIC.

Leila wants to complete the analysis around penalties and consequences and has asked Henny for ASIC's view on whether a void clause would attract the statutory penalty expressed to apply to void contracts under the Act.

Leila has referred the section 334 question to her internal legal team. The meeting is soon. She could make an executive interpretation call instead of waiting for internal legal or she could tell Bowy that she isn't clear on whether the provision intends to penalise any provision that is void, or whether that provision being void needs to nullify the entire contract before it will be subject to a statutory penalty.

Romy - the CEO of Mortgages R Us

Romy has asked his legal team to confirm that the Mortgages R Us products, operations and policies comply with consumer law. Romy has also asked to see a random sample of 10 consumer complaints. Romy is not confident that Mortgages R Us would survive the sort of investigation that ANZ went through. Bowy seemed to sneer at the suggestion that regulatory overkill was hampering financial innovation. Anything other than a clean reputation might undermine the ABA's lobbying efforts.

Mortgages R Us cannot incur big fines and write them off as costs of doing business. Even without the fines, the use of unlawful clauses in pro-forma contracts does not inspire investor confidence.

Romy has just been appointed to the board of the ABA. If an issue is raised about compliance that might spread liability to other members, he is concerned for the relationships he is building with this group of lenders across the market. If they act together, the Parliament should fall into line. They employ thousands of staff, sponsor plenty of parliamentary initiatives and are present at most social events that provide an opportunity to grease the wheels of commerce. Stepping out of line and admitting to conduct that falls short of consumer standards might be disruptive. On the other hand, an assertive tone with Bowy may come back to bite when the regulator next conducts an investigation into lending practices.

Shae - the General Counsel at Mortgages R Us

Shae manages the legal team at Mortgages R Us. A panel of the major law firms is used for new products and a couple of smaller ones is used for the higher volume, vanilla transactional work.

Shae's priority has been on product disclosures and broker relationships. These projects support the bumper profit generating results that Mortgages R Us has reported.

Shae plans to respond to Romy's request for confirmation by confirming that the panel law firms have confirmed that sign offs on product terms and transactions cover material risks in line with market standards. Shae asks each of Greydust and Dustygrey to certify compliance with consumer law so far as it relates to the work they have been engaged to perform over the last year.

The Act is long. The National Credit Code is long. The Regulations are dull. Shae's job is more about managing workflow than practising law these days. From that helicopter position, the risk guardianship role is performed by briefing law firms to do the work. Her team is focused on managing the cost of the law firms by getting clear instructions to those teams and acting as transaction manager. On occasion, they might test advice.

However, if there is something to be found, it's better that it comes up now. Shae settles in to read the law. By the time she gets to Regulation 36(3) she notices that the boilerplate in the Mortgages R Us products appears to use incompatible terms. Shae makes a note to ask how one might determine the location from which the loan was first provided. Mortgages R Us uses a processing centre in Canberra to make loans, and that team is responsible for sending out the links to the loan agreements for electronic signing and for processing drawdowns.

Shae asks the product team how many new home loans were made in the last quarter. It's 4,000. 70% of those are transactions that are subject to the National Credit Code. The potential penalty exceeds profits generated by those loans.

Mortgages R Us doesn't keep specific records that track the location in which loans were first provided, and whilst the standard terms do require customers to notify any change of address, those records are patchy. The same standard form contract is used for home loans to which the National Credit Code applies, and those to which it does not apply.

Shae is considering the way she will frame her advice to Romy. When it comes to fairness in standard form contracts, the courts have said that no actual detriment needs to have been suffered for a term to be recognised as unfair. Section 12BH(k) of the Australian Securities and Investments Commission Act recognises terms that limit, or have the effect of limiting the rights of a party to sue another, as unfair.

If that judicial commentary informed the analysis of whether home loan standard form contracts that make forum selections in contravention of the mandatory requirements of Regulation 36, then the potential (strict) liability could be material. Does the size of the potential penalty ($33,000 per contract) make it unlikely that ASIC will actually apply that sanction? Is it worth the gamble? Can Shae assure Romy of material compliance and sweep this one under the rug?

Shae considers whether legitimacy can be claimed on the basis that the use of a severance clause to nullify the effect of unlawful terms protect against liability for contracting out, where that template is used for loans that are subject to the National Credit Code? Does that technical reading withstand a purposive interpretation of the anti-avoidance scheme?

Shae looks at market standards. Several lenders appear not to have reflected Regulation 36 in the standard terms they use.

• Is there safety in numbers?

• Does that approach suggest the abuse of a dominant bargaining position in setting out consumer terms?

• Does it suggest that they are willing to gamble on ASIC not noticing, or acting on non-compliance?

Does the mismatch in the penalty clause provide enough room for them to be confident that they can evade penalties at the prescribed rate on the basis that only the clause (rather than the contract as a whole) would be rendered void by reason of invalidity?

Ali - partner at Greydust

Ali manages the banking team at Greydust - a large law firm with offices across the country. Greydust is on the panel of all the big credit providers and is routinely engaged to act for them in launching new loan products. Preparing standard forms of contract is the daily grind. Mortgages R Us is a client. Greydust produced the loan, guarantee and mortgage documentation for each of the Mortgages R Us products in the market.

Greydust sends Shae a confirmation that material compliance has been reflected in the product terms, subject to the usual assumptions and qualifications.

Roni - partner at Dustygrey

Roni is a partner at Dustygrey - a mid-tier firm with a couple of offices and lawyers who are fed off recommendations made by the larger firms who act for originators (and value malleable actors in this supply chain). Dustygrey receives a steady stream of work that includes issuing asset opinions to debt investors who invest in the mortgage portfolios offered by Mortgages R Us. There's a template. Roni fills in the placeholders, takes a quick look for key terms and sends it off.

Roni has issued each of the asset opinions on the loan, guarantee and mortgage terms used by Mortgages R Us that have been offered to investors in the last year. It confirms the terms are legal, valid, binding and enforceable, and that the courts will observe the choice of law and forum nominated in the contract. The usual qualifications apply to recognise that there may be equities involved in observing the forum selection, but no specific caveat relating to Regulation 36 is made. The opinion is issued against a pro-forma template of the agreement. It assumes that placeholders will be completed and that it will be duly executed. The practical consideration about the location in which the loan agreement is first provided is not the subject of an assumption.

Dustygrey sends Shae a confirmation that compliance has been reflected in asset opinions issued, subject to the usual assumptions and qualifications.

Oona - the new home owner

Oona has been saving for a home loan deposit for 12 years. When she reached this goal, she consulted a broker with specific instructions to rank the loan providers for ethical practice. Her role as consumer advocate with the media regulator has made her aware of the sharp elbowed practices of some of the dominant moguls. She wants her broker to recommend a lender that demonstrates a commitment to ethics. This is the biggest purchase of her life and she wants to spend her money in line with her values. Her broker laughs at the request and sends off the eligible loan offers, ranked by interest rate, recommending the cheapest option - which happens to be Mortgages R Us.

Oona asks her lawyer, Quincy, to act on the conveyance, and to have a look at the loan documentation. Oona has mentioned to Quincy that she plans to live in the Sydney home until she moves to the Northern Territory in 9 months, when she will take up a consumer advocacy role with the media watchdog in Darwin.

Oona signs up with Mortgages R Us. The docusign comes through when she is on holiday in Queensland, so she signs it from that location. She settles in to her new home in Sydney and starts paying down the debt.

After Oona leaves Sydney, she manages her Sydney home as an investment. A big storm swept through and the structural damage now requires extensive remediation works. Oona misstated the year of construction of the house when she applied for insurance and her policy has been cancelled for misrepresentation. Oona cannot find an insurer to issue a policy until the damage is repaired. The mortgage covenants require insurance and her bank has been chasing her for a certificate of currency. The calls are becoming frosty and the bank has mentioned that the next step is enforcement if she doesn't get it sorted. The bank has mentioned repossession in these calls.

Oona asks Quincy what next steps are - she plans not to comply with the insurance undertaking. It's unconscionable to impose it if the insurer's won't provide cover. Oona can't find a building contractor to do the remediation works and she is stuck. Oona has been volunteering with the courts in the Northern Territory and has seen the judges take care with the consumers there. If the bank sues, Oona wants to know if the case will be heard in Darwin, where Oona can take the day off work and avoid the expensive travel costs to Sydney. She can consult with the local legal centre volunteers about her case and expect a set of judges who aren't aligned with the interests of big banks and insurers.

Oona lodges a complaint with Mortgages R Us' complaints team. She fires off a message to ASIC's complaints line after an unhelpful exchange with the bot that Mortgages R Us uses to manage consumer complaints.

ASIC's team has received Henny's request to send complaints through. This one form Oona is flagged and sent to Henny, who sends it over to Leila.

Quincy - partner at Local Shingle Lawyers

Quincy's practice spans a broad range of family, estates and consumer law. Oona's request for an ethical lender is unusual, but for a fixed fee service, the level of diligence that can be performed won't go much beyond checking that the key requirements of the contract have been set out in the documentation. Quincy doesn't notice that Oona's loan is expressed to be governed by the law of the State in which the borrower resides at the time of entry into the loan, and the courts of that State have jurisdiction over disputes. That's up the back and no one cares about the boilerplate.

Quincy tells Oona to work with her broker to find the loan she wants to use, while he focuses on the conveyance. With that, the job is done.

When Quincy receives Oona's calls about the insurance problem, he's inclined to tell her that he's not available to take on new work. He prefers the standard small transactions that don't amount to much. He's sure that someone, somewhere has applied the rules. Oona should focus on finding a contractor to fix the house so she can get insurance. The law is a poor lever for those who cannot afford the cost of the justice if offers.

Tom - the debt investor at Yummy Mortgage Exposures Fund

Tom runs a debt investment book and invests in all the bonds issued by Mortgages R Us, along with many issued by the other home loan lenders. It's standard practice for the issuer to procure an asset opinion addressed to the investors, which confirms that the terms used to generate these debts are legal, valid, binding and enforceable.

Mortgages R Us has used Dustygrey for this opinion routinely. While Mortgages R Us does pay the fee issued by the law firm appointed to act for Yummy Mortgages Exposures Fund in entering into this debt investment, the retainer is on the terms of a scope that is approved by Mortgages R Us. That means checking that an asset opinion has been issued and that it is addressed to Yummy Mortgages Exposures Fund.

Yummy Mortgage Exposures Fund has just hired a new analyst to strengthen the market risk and compliance team. The analyst previously worked at ASIC. Tom has heard that ASIC might be taking an interest in consumer law compliance from his new colleague. Tom is conscious that the asset opinion is one of the last steps in the investment process and hasn't warranted deep focus in previous transactions.

Tom's new colleague has introduced a compliance audit that requires mortgage originators to certify consumer law compliance each year. The fund has a responsibility to those whose savings are invested under its stewardship. Clean products are expected. These investment structures don't have the support of the issuers for fines at the levels contemplated for avoidance penalties.

Tom has had a hard time negotiating with servicers. These debt investments are structured to be transferable. In the distress scenario, the loans need to be legally transferred, so that the lender of record on those agreements, becomes the investors representative. At that point, they are the credit provider, attracting all the responsibilities outlined in the Act. Servicers require indemnities from the investors who appoint them and provide a schedule of costs for enforcement work that assumes a venue for proceedings that can be used to price that service. They need to know, practically, which governing law applies and which venue has been agreed for enforcement proceedings.

Tom has invested in Mortgages R Us' last 10 transactions and accepted the asset opinion provided, after checking that it was properly addressed, that it could be disclosed to investors and that it named the correct transaction. In the interests of deal hygiene, Tom decides to read this one, and to ask Dustygrey a few questions.

Tom knows that Dustygrey considers Mortgages R Us to be its valued client. Tom is an annoyance to Roni. When Roni tells Tom that the opinion that the courts will recognise the choice of forum nominated in the contract, its because the market is taking this approach. No further comments will be provided.

Henny - the ASIC analyst assigned to support Ministerial enquiries

Henny receives the request from Leila and lets it fall to the bottom of a lengthy to-do list. Aides never seem to stop. Henny is focused on figuring out how to regulate the booming private credit market. The word from on-high is innovate or die. This request seems nit-picky. It's not mission aligned.

Despite efforts to ignore Leila, Henny relents and decides to send a note to each credit provider requiring copies of these terms.

By the deadline for responses, Henny has obtained terms for Macquarie Bank, Commonwealth Bank, NAB, ANZ, ME Bank, BankWest, Pepper Money, Bendigo Bank and AFG.

The complaints team won't be able to gather the historic complaints information Leila seeks, so that part of the request will need to stay on mute, apart from Oona's complaint which happened to be lodged the day after this request came through.

Reference materials

The legislative background

Going to court is expensive, even if you believe you have a good case. Going to court in a State or Territory other than the one in which you live, increases the stress and expense.

In 2008, the Productivity Commission reviewed Australia's consumer policy framework. Its recommendations led to the regulation of consumer credit by the Commonwealth, under a single national regime. Enhanced consumer protection through dispute resolution mechanisms, streamlined court arrangements and remedies were components of the reforms introduced in the National Consumer Credit Protection Act 2009 (the Act).

Section 330 of the Act provides for the location for where court proceedings relating to credit contracts and mortgages being commenced being prescribed.

Regulation 36 of the National Consumer Credit Protection Regulations 2010 (the Regulation) requires that proceedings must be brought in the courts of the State or Territory where the debtor, mortgagor or guarantor ordinarily resides (and if that is not known at the time the credit provider commences the proceedings, then the State or Territory of ordinary residence at the time the contract was entered into should be used).

Regulation 36(2) excludes some specific proceedings from the obligation to comply with this requirement. For the most part, they don't apply to credit providers. They do show that consideration has been given to procedure where there is more than one debtor, mortgagor or guarantor and those people do not reside in the same State or Territory, but that consideration has not been reflected in terms that provide an exemption from compliance to credit providers.

Regulation 36(7) provides for freedom to select a venue in contracts other than standard form contracts. Standard form contracts are contracts that come about in the circumstances described in section 12BK of the Australian Securities and Investments Commission Act 2001.

Regulation 36(9) contemplates the sorts of inconvenience that might arise where this venue rule is applied. It provides a procedure for transfers of proceedings, once commenced, along with criteria to be considered in making a decision about whether proceedings should be transferred. The freedom to select forum in standard form consumer credit contracts has been constrained by the Regulation.

The Regulations were made on the advice of Chris Bowen (as Minister for Financial Services, Superannuation and Corporate Law). Bowy has succeeded Minister Bowen as lawmaker with responsibility for making regulations to give effect to the Act. Regulation 36 is unchanged since its inception (apart from a rule to recognise the role of the Family Court - which for the purposes of this scenario, is not relevant). It specifically applies to mortgages. Parliament is expected to appreciate that the enforcement process (leading up to repossession) will require compliance with process that may differ in each State or Territory. A judgment given in one State may need to be recognised in another before it can be enforced. This inconvenience is assumed to have been considered and accepted in making Regulation 36.

Anti-avoidance was considered when the Act was made. Section 334 of the Act renders a provision of a contract by which a person seeks to avoid the effect of the Act as void. It is a strict liability offence if a contract becomes void under that rule. The offence attracts a criminal penalty of 100 penalty units ($33,000).

Mortgages R Us contracts

Mortgages R Us uses loan agreements, guarantees and mortgages, each of which contain a governing law clause and a severance clause in the boilerplate.

Governing law and jurisdiction

The loan agreement

This contract is governed by the law of the State or Territory in which the borrower resides as at the date the contract is made and the courts there have jurisdiction over any matters relating to it, except that if more than one person is borrower under this contract, then this contract is governed by the law of the State or Territory in which the loan agreement was made and the courts there have jurisdiction over any matters relating to it.

The mortgage

This contract is governed by the law of the State or Territory in which the property is located and the courts there have jurisdiction over any matters relating to it.

The guarantee

This contract is governed by the law of the State or Territory in which the guarantor resides as at the date the contract is made and the courts there have jurisdiction over any matters relating to it, except that if more than one person is guarantor under this contract, then this contract is governed by the law of the State or Territory in which the guarantee was made and the courts there have jurisdiction over any matters relating to it.

Severance

If any provision of this contract is or becomes unlawful, it is of no effect and does not form part of this contract. The remaining terms continue to apply.

The Mortgages R Us opinions

The product sign off

Greydust was engaged to produce terms that comply with consumer law. The standard form contract produced was issued to Mortgages R Us with a sign off letter that reports its terms to be compliant with consumer law. No qualifications or assumptions about Regulation 36(3) are made. The following is extracted from the sign off letter.

These terms have been prepared with effect as of the date of this letter. They conform to the requirements of the law at that date. Courts in the nominated jurisdiction will enforce them, subject to the standard qualifications and assumptions.

Our sign off is qualified by recognising that the courts may take account of non-contractual representations made, or equities that may lead to the terms being set aside or read down to accommodate other interests.

The asset opinion

Dustygrey issues 3 opinions each year to investors in bonds issued by Mortgages R Us. In that opinion, Roni opines on the validity and enforceability of the pro-forma terms. No qualifications or assumptions about Regulation 36(3) are made.

The following is extracted from the asset opinion.

• (legality) the terms are legal, valid, binding and enforceable.

• (choice of law) the courts of the nominated jurisdiction will recognise the choice of law made in the terms.

• (forum) the courts of the nominated jurisdiction will recognise the choice of forum made in the terms.

This opinion is qualified to acknowledge that courts may consider equities or non-contractual interests that prevail over the standard contractual forum elections.

Oona's complaint

To: Joe Longo and the ASIC Team Subject: Request for assistance – venue and conduct of Mortgages R Us

Dear Joe and team,

After twelve years of saving, I finally became a first home owner with a loan from Mortgages R Us for a small house in Berowra, NSW. I lived there for nine months before relocating to Darwin for work. I've lived here happily for 2 years.

Recent storms badly damaged my Berowra home. My insurer cancelled my policy because I’d listed the wrong construction year in the policy application. I’m struggling to afford repairs and repayments. Mortgages R Us now calls me every week about insurance, repairs, tenancy and the debt ratio. When I tried to explain, their representative cut me off and said repossession would be next. The tone was dismissive — even joking that “Sydney judges don’t waste time on these cases”.

I’ve since learned that under consumer credit law, disputes should usually be heard where the borrower lives. My contract instead requires proceedings in New South Wales, where I used to live. If Mortgages R Us sues me there, I’ll have to spend my repair savings travelling to Sydney just to have my day in court. This is all very stressful.

I’m asking ASIC to:

• Confirm whether Mortgages R Us’ loan contracts comply with Regulation 36 of the National Consumer Credit Protection Regulations. Why are they allowed to write contracts that require this venue?

• Ask Mortgages R Us to stop calling me and to acknowledge that any proceedings should be brought in the Northern Territory, where I now reside.

Thank you for your time and the work you do to give consumers a shot at justice.

Notes for the facilitator

Facilitator's guide

Your role is to maintain momentum. Providing the initial prompt to a participant might start the exchange. You can then call on other participants to react to what has been said. If the group reaches a point where something can't be resolved, you can break that stall by injecting a factual development that can help the group to move on.

You should resist providing solutions or opinions on how participants should take their decisions. Holding space for discomfort and allowing conflicting opinions to play out might help the group to practice engaging under conditions of disagreement.

• Each participant should receive a character outline as well as the backstory, the legislative background, and the Mortgages R Us clauses and opinion extracts. These should be distributed in advance of the scheduled session. Check that everyone has read the materials, or allocate an additional period of reading time to the beginning of the session.

• The facilitator opens the session with a brief outline of the backstory (participants are expected to have read it before the session). These facilitation notes should not be distributed.

• Participants should remain in character throughout the process. There is no right or wrong answer, but the reasoning used to make decisions should be shared.

Scoring

You can choose to score this if you wish. Provide each participant with a scoresheet, listing each character's name in one column, and each of Trust Tick, Sharp Swipe and Questionable as titles for the next three columns.

After each marked pause, each participant awards any character that participated in the segment with either:

• Trust Tick (+1): "I'd trust this person's judgment and integrity"
• Sharp Swipe (-1): "This person's approach undermines trust"
• Questionable (+10): "Technically defensible but morally questionable"

You can score anyone whose character performed in the segment. You cannot assess yourself. Record scores on your scoresheet, and make a note of your reasons. At the end, we'll discuss patterns.

Guide the scenario

Part 1 - A meeting has been called

1. Open the session by inviting Bowy to announce a meeting with the ABA and its board members. The key point is that members are put on notice that Bowy is looking at their home loan standard contracts and considering contracting out liability.

2. Ask Romy what information he needs and how he intends to prepare for the meeting with Bowy. Let Romy suggest that he wants to talk to Shae.

3. Ask Shae if she is going to refer the request to the law firms who have been engaged to provide product or transaction advice.

4. Let Shae ask Ali how the standard form terms in the pro forma contracts that Greydust produced align with the mandatory venue terms in the Regulations or the liability for contracting out. Ask Ali how a person is expected to know where the agreement is first made?

5. Let Ali respond. If it's dismissed as immaterial, or as compliant on the basis of an assumption that borrowers, mortgagors and guarantors live in the same State or Territory as they property, or the place where the loan is made, or the place where they lived when the loan was made, ask Ali whether these factual assumptions have been disclosed in the product sign off. Let Ali reply, and then ask Ali if there is anything to disclose to Graydust's professional indemnity insurer?

6. Let Shae ask Roni how the legal opinions produced on each debt investment asset opinions were given without assumption or qualification on the enforceability of the forum clause or the liability for contracting out.

7. Let Roni respond. Ask Roni if there is anything to declare to Dustygrey's professional indemnity insurance provider.

8. Let Ali and Roni dismiss it as immaterial. In their views, it's unlikely that anyone will complain about this. The severance clasue in the contracts allows the forum selection clause to be removed.

9. "Shae, probe that. What's your response?". The key points are: 1 - that contracting out liability under section 334 does not require any actual detriment. It is a strict liability offence and will arise where a clause offends the effect of the law; and 2 - does the mismatch between a void clause in 334(1) and a void contract in clause 334(3) a genuine claim that compliance is reflected in the contract terms?

10. Pivot to Shae. Greydust and Dustygrey have replied to Shae's enquiries. How will Shae brief Romy? The law firms have dismissed the question as immaterial. If that's satisfactory to Shae, there is a market standard reason to claim that defensive advice has been obtained. Shae will brief the enforcement team to make sure they determine forum by residency for those contracts to which the National Credit Code applies. Or: Shae might raise the issue with Romy. If its an issue for Mortgages R Us, it's an issue for the other lenders. They're all in it together. If any one of the ABA members admits error in the meeting with Bowy, it's better that Romy is prepared.

11. Whichever option Shae chooses, suggest the other as an option.

12. Ask Romy what he intends to do with the response he has received from Shae?

13. Allow Romy to answer. Has he solicited the views of the other ABA members? Shae mentioned that her scan of terms in the market are generally incompatible with the effect of Regulation 36.

14. One last thing, Tom from Yummy Mortgage Exposures Fund has sent through an annual compliance audit. The fund requires loan originators to confirm compliance with consumer law as a new internal review. Tom, tell Shae what you need.

------- If you are scoring, take a pause and invite all participants to score each of the characters who made a contribution in this segment. -------

Part 2 - Meeting preparation in public office

1. Ask Bowy how he intends to prepare for the ABA meeting.

2. Anticipate that Bowy will ask Leila to do some diligence on the standard form contracts used across the market, and to consult ASIC about consumer complaints.

3. Ask Leila for an update. Has she found anything that Bowy can use in the meeting? Does she have any concerns?

4. Anticipate that Leila will raise the mismatch in clause 334 (between the void clause in subsection 1 and the void contract in subsection 3). Ask her how she intends to deal with that question mark? One option is to interpret it to read as if the penalty maps to the offence. Legislators may not be familiar with contracts. The alternative is that the void clause is the only sanction for any prohibited term and provided that severance is possible, there is no further consequence. Parliament may have intended that a criminal penalty apply only where severance is not possible and the whole contract is void as a result. If that's the case, the sting might be more subtle if Bowy uses this example.

5. Let Leila explain that she has asked the internal legal team for interpretation of section 334. She hasn't heard back. The meeting is coming up soon. There won't be an opportunity to take advice from her legal team. Prompt her for an update on her enquiries to ASIC.

6. Turn to Henny. Ask how ASIC will respond to Leila's questions.

7. Anticipate that Henny will say that he has forwarded the terms received from some of the market participants, along with one recent consumer complaint (Oona's).

8. Ask if Henny will be joining the meeting. Let Bowy respond. Will the law maker openly work with the market regulator in seeking a balanced approach to dealing with the ABA's progressive innovation agenda?

9. Ask Bowy if he has considered using Oona's complaint in the meeting. It demonstrates the need for balance with a human story.

10. Henny, when Leila's request came through, you took steps to respond but kept your focus on other priorities. Was there something about Oona's complaint that motivated you to act on this project?

------- If you are scoring, take a pause and invite all participants to score each of the characters who made a contribution in this segment. -------

Part 3 - The meeting

1. Introduce the context for the meeting. We're here to know whether the lenders take a confident approach, sure in their footing that the problems identified in the Royal Commission, and the consumer trust deficit that followed, have been remediated? Will the Minister use forum as a basis for suggesting that the ABA's members have not earned the trust required to self-regulate under more relaxed regulatory oversight?

2. Turn to Bowy. Here we are. How do you communicate to the ABA members that the expectation of the regulation is that the inconvenience of following the obligors is a cost of doing consumer credit business. That expectation is subject to transfer considerations that have been outlined in the Act.

3. Invite Romy to respond to Bowy.

4. "Romy, you have statistics showing most borrowers live where the mortgaged property is. Do you lead with this?". Remind the room that the clause will be offensive if it does not give effect to the Act. The Act creates a mandatory venue rule. Detriment does not need to have been suffered for there to be an offence.

5. Anticipate that Romy might say that Mortgages R Us relied on the advice of law firms who represent all the market participants in performing this sort of work. Those law firms have led this approach. The lenders should not be sanctioned for acting on advice.

6. The CEO of one of the big banks decides to take a more aggressive approach with Bowy. She tells Bowy that if Bowy wants to receive support from the bank, Bowy will need to get on board with the ABA's innovation reform agenda. Consumer complaints are not the focus. Penalties can be endured as a cost of doing business. The bank's balance sheet can fund them. Let's see how the bureaucrats like them apples.

7. Let Bowy react. Focus on the part of the response that suggests that Bowy will either double down or drop the point in response to an influential CEO throwing a tantrum.

------- If you are scoring, take a pause and invite all participants to score each of the characters who made a contribution in this segment. -------

Part 4 - After the meeting

1. Romy: the big bank CEO stormed out of the ABA meeting with the Minister. Does that reaction align with Mortgages R Us' values? Mortgages R Us doesn't have depositors who hold savings in its accounts. The business relies on investors. Some of them are superannuation funds who use the retirement savings of consumers to make those investments. The assets need to be compliant and transferable. Are fines an acceptable cost of doing business to Mortgages R Us, and in the event of transfer, the investors who fuel your business? What will you discuss with Shae?

2. Shae has been considering options and widening her internal review. She has received calls from the relationship managers who work with Tom and Oona. Ask Shae what happened? Ask if Shae is concerned that Mortgages R Us may have prioritised procedural convenience in litigation over compliance with Regulation 36.

3. Let Shae and Romy talk. Ask Romy if he will speak to Tom.

4. Turn to Tom. Anticipate that Tom will ask Romy if the products being offered to Yummy Mortgage Exposures Fund are compliant with consumer law? If this venue rule is being ignored, is Mortgages R Us ignoring other mandatory requirements of the law?

5. Let Romy respond. Anticipate that Romy will anticipate that all the other lenders who present similar investment opportunities to Tom have acted on the advice of the same set of law firms to prepare the pro forma terms. Tom won't find a better product in the market.

6. Tom's credit committee approval was issued on the basis that law firms provided clean opinions on the assets in the Mortgages R Us portfolios. Bonus negotiations are about to start. Roni has dismissed his request for clarification without reasoned analysis. What does Tom want from Romy and Shae in order to make decisions about whether he flags the issue with his internal risk colleagues?

7. Turn to Quincy. Oona has made a complaint about Mortgages R Us to its complaint team and to ASIC. Shae has been in touch to address it. What would you propose to do about it? Anticipate that Quincy will ask for the documents to be amended so that Oona is assured that Mortgages R Us will comply with the venue rule in Regulation 36.

8. Shae: amending contracts to reflect the mandatory venue rule (and clean up the other location references that are to be used to determine the governing law or forum) would be a huge project. There are thousands of these loans. Systems would need to be created to record these particulars. This is the sort of red tape that the ABA is lobbying to reduce.

9. Oona is at this meeting. The lawyers are talking but there is no mention of right or wrong. Ask Oona if her expectations are being met.

10. Henny has sent a follow up request to Mortgages R Us. ASIC has decided to focus on consumer protection in the home loan market and has notified lenders that ASIC is considering offering a 1 month amnesty to participants. Anyone who discloses avoidance in standard contract terms will receive penalties at the rate of 1%, plus an additional 1% for each lender who takes up the amnesty prior to the lender at the time they join the program (example: if 2 other lenders have joined before you, the penalty rate is applied at 3%) of the prescribed rate for each offence. There is a 10 day consultation period for industry participants to provide feedback on the initiative.

11. Ask Romy for a reaction to Henny's initiative. Anticipate that Romy will be aware of the section 334 mismatch and that the offence is not a headline grabbing subject, so public support might be limited. The innovation agenda is far more exciting. A PR campaign might generate a groundswell of banking, technology and job-creating support.

12. Shae's report to Romy suggests that of the 4,000 loans made in the last quarter, 70% of them are subject to the National Credit Code. That would mean more work to refer to a law firm, but how does Shae identify one that will take a compliant approach? Let Romy, Shae and Ali discuss.

13. The steady stream of asset opinion work sent to Roni may have softened his willingness to raise issues. By the time the engagement begins, the transactions have already been generated. The deals won't close if the opinion isn't clean. Ask Shae if variation in the source of the opinions has been considered? Ask if reliance on external law firms is providing the robust analysis upon which good governance depends.

------- If you are scoring, take a pause and invite all participants to score each of the characters who made a contribution in this segment. -------

THE END

Facilitator success

Success as a facilitator will be evident if participants remain in character, and professional in their interactions, even when they are uncomfortable.

If there is consensus on a point that has not been established or substantiated with reasoned analysis, call it out as group-think. If legal and commercial tensions are surfaced authentically, a character changes their position, an accountability gap is either accepted as tolerable risk or flagged for further action or a debrief identifies a fresh perspective, then the group has worked together to address an issue.

Debrief

Accountability and power

1. Where does accountability for compliance with Regulation 36(3) live?

2. Which actor held the real power to change the outcome?

3. Who was surprised by a decision made? What would you have done differently?

Product and clause design

1. What legal risks are most likely to be dismissed as immaterial? If this forum selection clause fits that description, how do you define the limit? What else is in that category?

2. If you are satisfied that the contract terms are expressed in terms that comply with the effect of the Act, how do you identify legal formality as opposed to trust inspiring moral responsibility?

3. If you are not satisfied that the contract terms are expressed in terms that comply with the effect of the Act, do you have broader concern that the decision-makers involved in producing this contract may have applied the same judgment in making other decisions? Do you follow up on that concern?

Templates, fairness and consumer burden

1. Should lenders benefit from the convenience (to them) of producing a single template for use across all home loans? Where the National Credit Code applies, some terms are unlawful. Should consumers be expected to appoint their own independent lawyers to advise them which of the terms of the standard form contract apply and which are unlawful, and what should happen when unlawful terms are severed from these agreements?

2. Lenders could produce two separate templates if they wish to use different terms where the National Credit Code does not apply. They might be expected to issue consumers with lawful terms. Does this exceed reasonable expectations of the lenders or should they be expected to do this?

Operational input

1. This was a technical compliance issue that had implications for the documentation team originating new loans (to record the place in which the loan was first provided somewhere), the enforcement team (to use residency in determining venue for those contracts that are subject to the National Credit Code), the legal team (in deciding how to test advice being issued by law firms) and for management (in deciding how to set a culture for compliance). Do you recognise this pattern in your workflow?

2. What’s the line between delegation and abdication of legal responsibility? Which decisions do you consider legal risk, and which of them are commercial risk (based on a legal trigger)?

Team, culture and integrity

1. How do you know that you are working amongst like minded colleagues? Would role playing help you identify suitable candidates for roles in your organisation?

2. What factual assumptions or biases may have informed a genuine view that the clauses used by the ABA's members might be valid?

3. If you were hiring, which character would you want in your team? Why?

4. Where did loyalty conflict with integrity? How did people resolve it?

5. Did anyone receive Questionable scores? These decisions reflect value judgments. Who set these values and how are they communicated across the organisation?

Last updated

November 2025

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