Broking industry outraged by Unloan introducer program

Under the program, accountants, conveyancers, financial planners, lawyers, and real estate agents who have an active ABN and are registered for GST can receive 0.33 per cent (inclusive of GST) of the value of every settled loan they send to the bank.

The referral program is not open to mortgage brokers.

Several members of the broking community have voiced shock and outrage at the move, particularly given the fact that several major banks (including ANZ and NAB) have been fined millions of dollars as a result of introducer programs that had gone wrong in the past and that these referrers are not qualified to offer credit/loan advice.

‘Typical of some of the grubby practices we have seen from banks’: FBAA

Speaking to The Adviser about the move by Unloan to roll out an incentive offer to non-broker introducers, Peter White AM, managing director of the Finance Brokers Association of Australasia (FBAA), said: “The decision by Unloan – a division of CBA – to pay referrers 0.33 per cent commission is typical of some of the grubby practices we have seen from banks over the years, but unfortunately it’s not limited to Unloan. Other banks have these same referrer practices in place.

“This rate of commission on an $800,000 loan equates to just over $2,600, for what?

“A referrer is only allowed to pass on someone’s name and contact details, but if you believe that all referrers are not providing credit assistance in breach of the law, I have an Olympic stadium to sell you.

“Let’s be honest – banks have been caught out time and time again not following the rules, and have been fined on multiple occasions. This clearly doesn’t stop them because what’s a few million dollars to one of the big banks?

“I might be able to accept a lender paying a couple of hundred dollars to a referrer but these exorbitant rates of commission potentially encourage illegal activities and banks must stop this practice.”

The FBAA head added that paying such a large commission to an introducer that has no best interests duty requirement, no clawbacks, and may not have credit advice knowledge would result in poor consumer outcomes.

“While mortgage brokers do the right thing, act in the best interests of consumers and are subject to unfair clawbacks, referrers can basically do what they want and laugh all the way to the bank, so to speak,” Mr White said.

“It is clear that the banks have learnt nothing from the royal commission. If they won’t stop this grubby practice, the regulator must step in.”

‘How can that be in the best interests of the consumer?’: MFAA

Anja Pannek, the chief executive of the Mortgage & Finance Association of Australia (MFAA), said that the association had also become “increasingly concerned” at the use of large-scale referrer programs used to introduce consumers to lenders, noting such programs were heavily scrutinised during the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

The MFAA CEO said: “We are increasingly concerned that these types of large-scale lender referral programs are still being used, especially given the importance of mitigating consumer harm in regulated consumer lending.

“Unlike the extensive protections customers are afforded working with their broker, there are no corresponding regulatory guardrails for referrer arrangements. We really have to question whether these programs are in the best interest[s] of consumers.

“At the end of the day, referrers are being paid for directing a consumer to one lender. How can that be in the best interests of the consumer?”

Ms Pannek highlighted that more and more borrowers are turning to mortgage brokers for the “guidance, choice, convenience, and expertise they provide” and was therefore concerned that borrowers may not know that there are other, and potentially better suited, loans out there for them.

“Brokers understand their customers’ needs, assess requirements, and importantly have a duty to act in their customer’s best interests. This duty has clearly been the driving force behind more consumers using mortgage brokers and also low complaints generated by brokers,” Ms Pannek said.

“Without the additional needs analysis and support a broker provides, will consumers understand what they are signing up to?”

Ms Pannek highlighted that the Commonwealth Bank’s Unloan brand was using referrers, but not making its product available through mortgage brokers.

She concluded: “At the MFAA – we want to see channel parity wherever possible in the lending market. This is central to our advocacy.

“A consumer should have the same choice, irrespective of whether they choose to use a broker or go directly to a bank.”

CBA broker flows nosedive

The move by CBA’s Unloan brand to pay commissions to referrers came as the major bank prioritises its proprietary channel.

In CBA’s results for the first quarter of the 2024 financial year, the group revealed that it had shifted its focus to proprietary distribution.

It stated at the time: “We have focused on proprietary distribution with new proprietary home loan fundings in the quarter broadly flat on the prior comparative period at $18 billion, while lower margin new broker fundings declined [by around] $5 billion over the same period.”

Reacting to the major bank’s shift in focus, Mr White had suggested that CBA had “turned its back on brokers”. However, following the backlash, its head of third party told The Adviser that it remained committed to the channel.

The flow of broker loans has been falling rapidly since then. According to the big four bank’s recently released financial results for 1H24, broker-lodged loans to CBA (excluding Bankwest and ASB) fell to 33 per cent.

This marked a 9 percentage point drop on 1H23 and was the lowest proportion of broker-originated loans for the major bank in recent years (the lowest proportion previously was in the six months to June 2023, tied with FY21).

When including Bankwest, the group saw 43 per cent of its new business come through the broker channel in 1H24. Indeed, the banking group appears to be prioritising its subsidiary brand Bankwest as its broker offering (with several investments and updates being rolled out to brokers through Bankwest) while CBA – which has Australia’s largest branch network – focuses on proprietary.

What do you think about introducer commissions? Have you seen any other lenders offering a similar commission split to introducers? Let us know in the comments below!

[Related: Third-Party Lending Survey has launched for brokers]