Major aggregator dismisses ‘surprising’ RC question

In his interim report, Commissioner Kenneth Hayne raised the question, “For whom does the intermediary act?”, adding that there is “no simple legal answer” to the question.

Commissioner Hayne added: “Broker, aggregator and lender may all see the broker as ‘the face of the lender’, not as ‘the face of the borrower’.”

However, in its response, Connective said that it was “surprised that the commission believes there is uncertainty as to who a mortgage broker acts for”.

“We cannot understand how the commission believed that there is a possibility that the mortgage broker represents, or is seen to represent, the lender,” Connective submitted.  

“From a mortgage broker’s or an aggregator’s perspective, a mortgage broker acts for the customer. We believe lenders would give the same answer.

“We struggle to see how a mortgage broker with the ability to submit loan applications to numerous lenders could be seen by a consumer to be ‘the face of the lender’ — as opposed to an introducer, who has an arrangement with only one lender.”

The aggregator also noted that broker agency is reinforced by the documentation a mortgage broker provides to their customers, which it said “clearly identi[fies] that the broker is working for that customer”.

Connective added that to “eliminate any possible doubt in a customer’s mind”, it will update its template Credit Guide (NCCP-prescribed document) to expressly state that brokers act on behalf of their clients.

Further, Connective refuted a perceived “inference” made by Commissioner Hayne in relation evidence regarding Commonwealth Bank’s former broker accreditation program, which required a broker to settle a minimum number of loans with the bank to maintain accreditation.

“[We] strongly disagree with the inference the commission made in the interim report that ‘in the eyes of at least some lenders, the broker’s task is to sell that lender’s products’,” Connective said.

“We commonly see lenders require brokers undertake regular training to remain current with their policies and procedures.

“It is fair for a lender to assume that a mortgage broker who has not submitted loans for a period of time would not be proficient with that lender’s current policies.

“Many lenders will turn a broker’s accreditation to inactive until refresher training is completed.

“We see this as the reason behind CBA’s approach, with their fault being a failure to communicate this message as opposed to an attempt to drive more loans.”

ANZ agrees

ANZ was the only major bank to explicitly respond to Commissioner Hayne’s question regarding “broker agency”.

The major bank stated that brokers and aggregators “act for the customer”, noting that that they “do not have the authority or capacity to create legal relations on behalf of ANZ”, do not owe a duty of loyalty to ANZ, and are “free to refer customers to other lenders”.

The bank added: “While ANZ does not contract directly with brokers, its agreements with aggregators and its Mortgage Broker Operations Manual state that the mortgage broker is not an agent of ANZ.

“At a practical level, mortgage brokers provide services to their customers, including gathering information from the customer regarding their financial circumstances, requirements and objectives.”

ANZ said that such services should not be regarded as performed on behalf of a particular lender because:

• the work may be done without regard to which lender will ultimately provide the loan, and may be used to make loan applications to several different lenders; and
• the work is necessary for compliance with the mortgage broker’s own duties owed to the customer, including under the National Consumer Credit Protection Act 2009 (NCCP Act) to act efficiently, honestly and fairly, ensure that borrowers are not disadvantaged by any conflict of interest, disclose commissions received, and comply with responsible lending obligations.

ANZ added: “Aggregators, as credit licensees, owe the same general obligations as mortgage brokers to borrowers under the NCCP Act.

“These duties owed by brokers and aggregators to customers support the proposition that they act for customers.”

Legal duty should not be extended to aggregators

Moreover, in response to a question posed by Commissioner Hayne regarding whether aggregators should owe a duty to customers, Connective said that it owes contractual obligations under its lender head agreements, and that it expect such obligations to grow as part of the Combined Industry Forum (CIF) reforms, which it said would expand its obligation to supervise and monitor its mortgage brokers.

“We also provide services to our mortgage brokers in accordance with the terms of the member agreement these brokers sign with us,” Connective added.

“Connective believes that the customers mortgage brokers deal with belong to them, not Connective, and as such, we do not believe any additional duty imposed on an aggregator in favour of borrowers is necessary or would lead to improved consumer outcomes.”

However, ANZ has said that it would support the imposition of a duty, similar to the “customer first duty” proposed by the CIF, on aggregators.

“As with mortgage broker duties, ANZ considers that aggregator duties ought to be codified in a similar instrument,” the bank said.

However, NAB — which owns aggregators Choice, FAST and PLAN — stated its opposition to the imposition of such a duty on aggregators, noting that while aggregators have a role to play in ensuring that their brokers fulfil their duties, they do not have any direct relationship with the borrower and do not make any credit decisions in relation to individual borrowers.

[Related: Major banks in favour of ‘customer first duty’ for brokers]