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The introduction of new minimum volume quotas by some of Australia’s biggest lenders has sent a shockwave through the broking industry.
Brokers are still reeling from last month’s announcement by several major lenders of new minimum volume requirements as well as accreditation sanctions for brokers who fail to meet the new standards.
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On July 1, CBA imposed a minimum quota on all brokers of four loans lodged and three settled in a six-month period. Westpac swiftly followed suit, introducing a new requirement of one settled loan every six months for brokers to retain their accreditation.
Such moves have raised serious concerns within the industry over the impact on brokers and their value proposition to customers.
AFG’s general manager of sales and operations Mark Hewitt is one senior industry figure who is staunchly against minimum volume requirements being imposed on individual brokers. He says volume quotas “detract massively” from the broker proposition and questions the benefit to consumers.
But Kathy Cummings, executive general manager of third-party banking at CBA, says minimum volume quotas will ensure brokers remain relevant and attuned to the bank’s policy and processes, as well as improve customer service standards.
“I believe these changes will improve the customer experience and deliver a more efficient partnership between brokers and lenders,” says Ms Cummings, who says the bank now requires brokers to attend a re-accreditation workshop to ensure they have a sound nowledge of CBA’s products and policies.
Improving service levels is also a key driver. “In recent months service levels have been impacted by significant volumes as well as poor quality submissions and errors,” Ms Cummings says. “The high level of re-work leads to a decline in both broker and customer service.”
At Westpac, managing risk and improving service standards are major factors in its move to introduce minimum volume quotas and accreditation requirements. Westpac now requires its brokers to settle one loan with the bank every six months, while new brokers are expected to lodge at least one loan within their first three months.
Westpac’s mortgage broker distribution general manager Huw Bough says brokers who are writing products need to be up to speed with the lender’s policies and application criteria.
“It is essential that brokers never provide their clients with incorrect or misleading information about Westpac products, and we feel our new broker on-boarding and re-accreditation process will help mitigate risk,” he says.
Choice Aggregation Services CEO Brendan O’Donnell says in most cases the new quotas are not difficult to achieve, but give rise to a broader issue.
“[W]here the spread of broker business is such that the largest market share of any one lender is no more than 20 per cent, then volume quotas are questionable,” Mr O’Donnell says.
Mr O’Donnell says one of the major concerns for brokers arising from new minimum volume requirements is the impact on their customer service proposition. He says brokers believe the changes will hurt their ability to offer products from a wide range of lenders.
“Brokers will really have to target three or four majors,” he says, “but where does that leave the customer? Are brokers going to go from being someone who can offer a borrower the best product to someone who can only offer three of four lenders?”
Consumer choice is not the only issue. At a practical level, tying volume quotas to accreditation stands to impact brokers whose focus is more the front end of the business.
Ian Fraser of Fraser Financial Services says he focuses on meeting and greeting clients as well as generating business leads, not writing the actual loans.
“I face losing my accreditation because my name is not on the loan,” he says, adding that any volume requirements should be imposed on the business as a whole, rather than individual brokers.
He also says minimum volume quotas are anti-consumer. “Our role is to offer borrowers a variety of options and find what option is best for them. But if a volume hurdle gets in the way, where does that leave us?”
