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The Finance Brokers Association of Australia has urged lenders to cease favouring brokers based on loan volumes before the best interests duty comes into effect.
FBAA managing director Peter White said lenders are still giving preferential treatment to brokers who write higher volumes, despite legislation being introduced that will end volume-based incentives, and remuneration reforms proposed by the Combined Industry Forum (CIF).
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“This disadvantages clients of other brokers and makes a mockery of the intent of this move,” Mr White said.
The FBAA warned that the industry would once again come under increased scrutiny if these practices are allowed to continue.
“We all put a lot of effort into taking the steps necessary to end volume-based broker clubs, and we are better off for it, but the industry’s reputation will take another hit if brokers are again perceived to be favouring certain lenders based on anything other than what is best for the client,” Mr White said.
Some lenders are still favouring business based on volume and are taking longer to start the process of the loan applications from brokers who do not write enough for them, according to Mr White.
“By way of a current example from a broker, without volume, it takes nearly an hour on hold for your call to be answered, and up to 30 working days for your application to be picked up. In some cases, this is extending to over 40 days,” Mr White said.
By contrast, he observed that it takes one to eight days to process an application submitted by a broker that is meeting a certain lender’s higher volume expectations.
Furthermore, high-quality borrowers are being disadvantaged because their broker was acting responsibly and in their best interests, Mr White said.
“This unfair – and I might suggest immoral – behaviour is unacceptable.
“With the BID soon to be implemented, how can a broker claim to act in the best interests of a client with this sort of pressure from lenders?” he asked.
[Related: FBAA berates banks on loan discharge delays]
