MFAA urges Senate to look at discharge times

As part of the committee’s ongoing inquiry into bank closures in regional Australia – and its impact on customers and regional communities – some of the representatives from the finance industry were asked to provide further evidence.

The MFAA was asked to elaborate on its submission – in which it flagged that brokers have been filling the void for credit services left following a 23 per cent decline in bank branches across Australia in four years to June 2021. (Indeed, National Australia Bank has come under fire for recently announcing it will close five bank branches the next year, in Scone, NSW; Emerald, Victoria; and Runaway Bay, Queensland.)

“Mortgage and finance brokers continue to be a trusted source of support and assistance for consumers, farmers, and small businesses in those communities. Many brokers have offices in communities where bank branches have closed, offering face-to-face engagement, support, and assistance in those communities for lending and finance needs,” the MFAA submission read.

“They guide customers through the loan application process, reducing the time, stress, and administrative burden associated with securing a loan by assisting customers in their selection of an appropriate product suited to their financial circumstances and needs.

“Specifically for rural communities, brokers have expanded the geographic reach of the mortgage and lending industry, assisting prospective borrowers in these communities to be aware of the range of lenders that are available in Australia, particularly those lenders that may not have a branch presence in their regional and local market.”

During the hearing, MFAA CEO Anja Pannek added: “Approximately one-third of our broker members live and work in regional and remote Australia. They help their clients with home loans, business, and agri lending. They help their clients with financial literacy, helping them with budgeting. They help their clients with digital literacy. They provide assistance, connection, and understanding in times of natural disasters and economic downturns.

“Access to banking and financial services is vital for these communities.”

Individual broker contributions recognised

“With the continued digitisation of core banking services, our members continue to support their clients in a very personal way – meeting with their clients face to face in their homes, offices, on their farms, or at their businesses,” Ms Pannek said.

Ms Pannek flagged specific examples of MFAA members helping borrowers access finance, including NSW brokers Ashleigh Pakis from Panache Financial in Goulburn and Karen Bashford from South Coast Business & Financial Solutions in Ulladulla.

She told the committee: “Ashleigh Pakis operates her broking business in Goulburn, NSW. Thirty per cent of her clients are small businesses, many [of them], farms. She speaks the language of the people she supports and understands the issues and challenges faced both by home owners and businesses where she lives and the community she supports.

“Karen Bashford has lived and run her business in Ulladulla for 25 years. She helps her clients with everything from setting up accounts online, printing statements, and organising home loans. She meets with her clients face to face so they can better understand how things like buy now, pay later impacts on getting a mortgage and helps set up savings plans so they can save a deposit to buy their first home.

“Many of her clients come into her office every three to six months to tell her how they were going with their budgeting. Like Ashleigh, she spoke to us about the challenges many of her older clients have around digital literacy and how she supports them [in] navigating this.”

Ms Pannek suggested that this personalised and personable service is part of the reason why mortgage brokers facilitated 71.5 per cent of all home loans in Australia, around four in 10 small-business loans, and improved access for rural customers seeking lenders that have an appetite for agricultural lending.

“It is clear that Australians are increasingly choosing the services of mortgage and finance brokers,” she said, adding: “We submit brokers are integral to rural and regional towns.”

Discharge times need to be regulated

The MFAA added that brokers have played a significant role in helping borrowers save money in this higher cost-of-living environment, particularly through refinancing. However, the CEO flagged that there were still impediments to brokers being able to deliver timely services to regional borrowers, including delay tactics by the lenders over discharging loans, an issue she said was particularly prevalent in this high refinancing environment.

“Against the backdrop of cost-of-living pressures, consumer outcomes can be improved through regulating home loan discharges thereby promoting competition and choice for home loan borrowers,” Ms Pannek said – highlighting that the 2020 ACCC Home Loan Price inquiry recommended that discharges be limited to 10 days.

“I think we do see, from time to time, behaviours by lenders where they look to make it more difficult … to really combat the fact that a broker may recommend that it’s in the best interests of the client to move to another lender.”

Ms Pannek said that this was “problematic” as it caused delays in borrowers being able to obtain a cheaper rate and therefore cost them more money.

The Senate committee suggested the frustration tactic may even be illegal.

Ms Pannek therefore reiterated the MFAA’s call that the inquiry “focus on how to best support this vital industry” and “ensure the competition and choice brokers provide to their clients [are] promoted and supported”.

She concluded: “In particular, we see opportunity to move forward recommendations of the 2020 ACCC Home Loan Price inquiry around discharges.

“Against the backdrop of cost-of-living pressures, consumer outcomes can be improved through further regulating home loan discharges thereby promoting competition and choice for home loan borrowers.”

Submissions for the inquiry are open until 29 February 2024 with the committee expected to hand in its final report by 16 May 2024.

[Related: Lenders ‘dragging their heels’ on discharge times: Broker]