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The mortgage broker associations have defended the industry after a Senate committee was urged to review broker remuneration and the quality of credit advice.
Senior industry leaders have hit back at a recommendation made by consumer groups for a new ASIC review into broker remuneration and the quality of broker recommendations.
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As reported by The Adviser, the recommendation was submitted to the Senate economics references committee’s inquiry into the financial regulatory framework and home ownership.
In the submission, the consumer groups recommended that to “confirm if mortgage broker market protections are working, ASIC should be directed to undertake new research into mortgage broker remuneration and the quality of recommendations by brokers”.
The Finance Brokers Association of Australasia (FBAA) and the Mortgage & Finance Association of Australia (MFAA) have both opposed the calls, saying that there are no grounds for such a review given there is “no systemic harm linked to brokers” and “complaints against brokers are minuscule”.
Speaking to The Adviser, Peter White AM, the managing director of the FBAA said: “Finance and mortgage broker remuneration has undergone more reviews than are found on Google and, without exception, the current structure has been found to be the best and fairest to both brokers and consumers – remembering, of course, that mortgage brokers must – and do – abide by best interests duty.
“This is accepted by both sides of politics and no one is questioning this except those groups who clearly don’t understand how the finance sector actually works.
“It is also important to note that complaints against brokers are minuscule (albeit, any that are made are taken very seriously).”
Anja Pannek, the CEO of the MFAA, told The Adviser: “While these comments from consumer groups were made in response to the Bragg Inquiry on the broader financial regulatory framework, it’s important to recognise that the mortgage broking industry is delivering strong customer outcomes. This is evidenced by the low level of AFCA complaints and (according to consumer group, Financial Counselling Australia) minimal National Debt Helpline calls relating to brokers.
“There’s no systemic harm linked to brokers; in fact, they’ve helped clients navigate some of the toughest economic conditions we have seen for some time. No doubt many of these borrowers are in a better position as a result of the relationship they have with their broker.”
The MFAA CEO also told The Adviser that the swathe of regulations introduced onto brokers following the banking royal commission – including the best interests duty, the conflict priority rule, prohibiting clawback costs to consumers, and banning volume-based benefits – were “working well”.
“Growth in broker market share and the continued low level of complaints are key indicators of success that mortgage brokers are living and breathing their regulatory obligations,” Pannek said.
“We acknowledge and respect the views of consumer advocates, and we remain committed to working with them to ensure consumer protection remains a core focus. The MFAA and consumer advocacy bodies share a common goal: a regulatory framework that keeps consumer interests at the forefront.”
Banker bonuses should be looked at: FBAA
While the two mortgage broker associations pushed back against the broker recommendations, the FBAA MD said that the consumer groups also flagged concerns with bank bonuses for home loan sales. He told The Adviser that the FBAA was likewise “concerned that some banks want to return to the practices of the bad old days”.
White said: “Recently, some banks have reinstated increased bonuses for their bankers, which is contrary to the recommendations of the Sedgwick report and the Hayne Royal Commission. They are again incentivising the risk of bad behaviour by bank staff.
“We know some bankers try and steal business generated by brokers through unethical practices and now the banks have again endorsed this possibility of this practice. This is often not in the best interests of the borrower and these practices should not be allowed.”
The FBAA MD said: “Let’s be honest – the banks would love to return to the days where there was far less competition, but the world has moved on and Australian consumers will never stand for that.
“If it wasn’t for brokers, consumers wouldn’t have access to such a wide range of lenders, many people would not even secure a loan, and less competition would mean higher rates and costs for borrowers.”
What do you think about the recommendations for a new broker review? Let us know in the comments below!
[Related: Consumer bodies call for ASIC review of broker remuneration]
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