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The FBAA has been urging ASIC to create a register for brokers who do not fall under the NCCP, given a lack of regulation targeting that space.
The managing director of the Finance Brokers Association of Australia (FBAA), Peter White, appeared before the House of Representatives standing committee on economics for its review of Australia’s four major banks and other financial institutions yesterday (29 July), where he was questioned by the committee on how the broking industry has fared since the banking royal commission.
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Mr White was asked whether he had seen mortgage brokers shift into other areas of broking (such as business or commercial broking) as heavier regulation has been imposed on mortgage brokers compared with other brokers.
In response to the query from the deputy chair of the standing committee on economics, Dr Andrew Leigh (member for Fenner), Mr White said that he had seen brokers diversifying into other areas of broking, rather than exiting the mortgage broking space, and transitioning into the business or commercial lending market as a specialisation.
“There is certainly a diversification component where people are moving into that sector,” Mr White said.
The FBAA MD revealed that the association has been petitioning the Australian Securities and Investments Commission (ASIC) for a long period to create a register for brokers who do not fall under the National Consumer Credit Protection Act.
He said he was calling for this register given that it was “very difficult to size it [and] it’s very difficult to control it”.
“Outside of ASIC law or common law, there’s very little monitoring, structure or regulation that is specifically targeted at that part of the industry,” Mr White told the committee.
Mr White said the FBAA has developed training for brokers who wish to diversify (including through annual commercial classes) as well as training on how to read balance sheets and profit and loss statements in complex transactions with business and commercial lending.
“So, we are very focused on the education piece for people that are going to that sector, and ensuring that they are properly skilled to undertake it.”
Impact of tech tools slower than expected
During the hearing, Mr White was also asked by Dr Leigh about the impact of the transition to electronic signatures and electronic documents for loan transactions.
Mr White responded that the impact “is probably a lot slower than what [was hoped] would happen from last year”.
He continued: “It’s most certainly strongly desired by our industry to make things more fluid, easier on the consumer... especially where we’re going to have continuing challenges with COVID, and the ability for people to get into places to electronically sign documents or to receive documents.”
Mr White added that the FBAA is supportive of, and encouraged by, lenders “who are at the front end of this” and have been offering the technological tools to “ensure the enablement of digital fulfilment”.
FBAA membership flattened during RC
Mr White was also questioned by the committee on how the broking industry has fared since the banking royal commission.
He was asked whether he had seen a drop-off in the number of finance brokers in the sector following the royal commission.
In response, he told the committee that the FBAA had seen a “definite flattening” of growth trends in FBAA’s membership since the final report was handed down in 2019.
However, as at the end of June 2021, the FBAA saw a 10.78 per cent net growth in its membership, according to research collated for the industry association by CoreData.
“So, we are expanding as an association,” Mr White told the committee.
“There’s a large portion of those members that are new to the industry.
“[The membership] did flatten out straight after the royal commission, and some people very proactively took the approach of, ‘I’ve had enough; I’m getting off’, but it didn’t mitigate inflow. It neutralised.”
Mr White said there is always a natural drop-off in membership driven by brokers who are approaching retirement, but the banking royal commission fast-tracked the decision to retire for some members.
He recently told The Adviser that ASIC’s raised industry funding levies are a reflection of higher enforcement against brokers and fees and charges could increase “if we don’t do better”.
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