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The CEOs of Mortgage Choice and AFG have criticised Commonwealth Bank CEO Matt Comyn’s support for remuneration reform, calling it a “thinly veiled” attempt to divert the attention away from the bank’s misconduct.
When pressed by counsel assisting the financial services royal commission Rowena Orr on Monday, 19 November, Commonwealth Bank (CBA) CEO Matt Comyn said that, in his view, a Netherlands-style fees-for-service arrangement would be the “most attractive” remuneration model for the broking industry.
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Mr Comyn also revealed that CBA had sought to introduce a “flat fee” paid by lenders in January 2018, before choosing not to go ahead with the change in fear that the rest of the sector would not follow suit.
However, in response to Mr Comyn’s remarks, CEO of Mortgage Choice Susan Mitchell told The Adviser that CBA, which owns a minority stake in the brokerage, was attempting to divert the royal commission’s attention away from the bank’s own misconduct.
“Mr Comyn’s calls for changes to broker remuneration at the royal commission deliberately put mortgage brokers in the spotlight,” Ms Mitchell said.
“It was a thinly veiled attempt to divert attention away from the tough questions he was facing from the royal commission about many years of poor culture and systemic misconduct in CBA’s banking practices.”
Echoing comments made by the Mortgage and Finance Association of Australia (MFAA), the Finance Brokers Association of Australia (FBAA) and several mortgage aggregators, Ms Mitchell accused Mr Comyn of harbouring ulterior motives.
“The motives behind Mr Comyn’s calls for changes to broker remuneration are self-serving and aimed at driving customers back to CBA bank branches and increasing the bank’s profits.
“This will only serve to make the home loan process more complicated and more expensive for consumers and reduces their choice.”
Ms Mitchell added that the fees-for-service model proposed by Mr Comyn would limit choice in the mortgage industry, and “ultimately increase the cost of borrowing”.
The brokerage CEO also noted that rewarding brokers for their ongoing service to a client incentivises good behaviour.
“Trail ensures good behaviour from brokers, as a mortgage broker does not receive their full remuneration if the loan goes into arrears, or the customer elects to refinance their loan through another broker or by going direct to another lender,” Ms Mitchell said.
“Trail incentivises a broker to ensure a customer’s needs continue to be met by the loan that [is] in place.”
Further, Ms Mitchell warned that a fundamental change to broker remuneration would have broader ramifications in the market.
“Mr Comyn has made it abundantly clear that he has not fully considered the threat his strategy will pose, which could jeopardise the livelihoods of 26,000 Australians directly employed by the broking industry,” Ms Mitchell said.
“Let’s not forget, most mortgage brokers are small local business owners and true customer advocates who strive to assist borrowers in their local communities to get a better deal and achieve their financial goals.
“Brokers have a vested interest in the financial welfare of their customers and provide exceptional service before, during and after settlement.”
The Mortgage Choice CEO also pointed to growth in broker market share, driven by high customer satisfaction, which she said was evidenced by Deloitte Access Economics’ The Value of Mortgage Broking’report, which found that over 90 per cent of mortgage broker customers were satisfied with the service they received.
“Collectively, mortgage brokers are the largest home loan writers in the country, with 55.3 per cent of all home loans originating through the broking channel — and we expect this number to grow as brokers continue to demonstrate the value they bring to Australians in an increasingly complex lending environment,” Ms Mitchell added.
CEO of the Australian Finance Group (AFG) David Bailey has also reiterated his discontent with Mr Comyn’s remarks, which he said “deliberately denigrated the mortgage broking sector” and were “nakedly self-serving”.
“Thousands of small business operators around the country are being bullied by the big end of town,” Mr Bailey said.
“The suggestion of a fee for service would have the effect of lessening competition, consolidating lending back to the major banks, driving up prices, and making it harder for first home buyers and other sectors of the market.
“Despite consumers voting with their feet, recent public statements suggest some have seen an opportunity to take back that market share by demonising their biggest competitors who have driven a fairer go into the market.”
Mr Bailey warned that an attempt to undermine the broking industry could “decimate” competition in the marketplace, pointing to AFG data which reported that brokers deliver 40 per cent of business to non-major lenders.
He concluded: “Moves to marginalise the broker channel would mean the loss of tens of thousands of jobs in small business across the country won’t be the only price paid.
“Make no mistake, the losers will be every single mortgage holder in this country as the big banks once again have free rein to take back control.”
[Related: Open letter to CBA CEO Matt Comyn]
