Banks threatening brokers over rate tracking tech use: FBAA

Since the Reserve Bank of Australia (RBA) cut the cash rate in February, more brokers have been using technology to better understand whether existing clients could benefit from more competitive rates.

While many banks have committed to passing on the 25-bp cut to borrowers, some lenders have failed to pass over lower rates and broker clients may still be sitting on interest rates that are higher than necessary.

That has led to a rise in demand for rate tracking services provided by companies such as mortgage broker retention platform Sherlok and fintech platform Stryd.

Speaking to The Adviser, FBAA managing director Peter White said: “The feedback I have received from members and others across the industry isn’t specific to one online tool or bank, however I have been told by various members that they have received directives from lenders not to use these [rate tracking] systems.

“The real issue here is that banks are restricting advancements in technology that have been developed to assist existing borrowers. These borrowers have a right to access the same lower interest rates offered to new bank customers, rather than becoming victims of rate creep.”

Commenting on how banks were justifying their actions, White said: “They appear to be claiming it is a privacy issue and while this may be legitimate in some cases, I don’t accept this is the entire reason or even the reason at all in some cases.

“If banks are using this as another way to increase profits, it would be quite unconscionable as it means customers are being intentionally disadvantaged.”

White said mortgage brokers had a responsibility to work in the best interests of their clients and part of that commitment was to review rates.

“Any attempt to outlaw automated rate tracking and repricing systems prevents mortgage brokers from properly servicing their customers,” White said.

“We all know that many banks love rate creep for their existing clients while they offer great incentives to new customers.

“But when back book pricing isn’t being reviewed it’s the customer who loses out, and over the long term the amount could be significant.”

He said that brokers should embrace technology because manual tracking is not as effective and “the banks know this.”

White said that some banks only re-evaluate customer rates after they receive a discharge authority.

“Time and time again we see banks offering better rates only when the customer is considering or starts the process of refinancing,” White said.

‘Deeply concerning’ for industry

Speaking to The Adviser, Sherlok CEO and founder Adam Grocke said the matter was a “real and growing issue”.

“We’ve heard from a significant number of brokers, both Sherlok users and non-users, who have raised concerns about certain lenders actively discouraging or attempting to block the use of automated repricing and rate-tracking tools,” he said.

“In several cases, the tactics used by lenders raise serious questions around competition, privacy interpretation, and broker independence.”

Grocke said that the issue appeared to involve two specific lenders, which he did not name.

According to Sherlok, one lender recently revoked 161 open banking consents without the client’s permission, Sherlok said, stopping clients from using Sherlok RateTraker.

Based on feedback from brokers and aggregators – and Sherlok’s own experience – the company has also seen:

• Threats to reduce sponsorship if aggregators support or partner with third-party repricing and rate tracking providers.
• Warnings to aggregators that they may be blocked from accrediting new brokers if they allow the use of these tools.
• Threats of de-accreditation for brokers who use third-party software to proactively reprice loans.
• A lender controlling and restricting how brokers help clients, saying: “You can only submit a reprice if the client is sitting in front of you and requests it face-to-face”.
• When brokers challenged these positions, Sherlok said lenders cited internal policy, despite there being no breach of aggregator agreements, broker obligations, or lender portal terms – and full client consent being provided via open banking.
• Lenders dictating to brokers how they run their business, specifically if they can or cannot use third parties and/or contractors.

Grocke said that some lenders are framing this as a privacy concern, but that misrepresents how open banking works.

“This kind of conduct appears designed to protect lender back book margins by reducing proactive repricing. If brokers are prevented from acting, fewer clients move to better rates – and lenders benefit from increased margin retention,” he said.

Grocke said that the impact on brokers would be “significant”, adding clients may pay thousands more than necessary.

He said that it also could mean:

• Brokers are discouraged from meeting their best interests obligations.
• Aggregators are put under pressure to remain silent.
• The competitive environment is distorted, benefiting a small number of lenders.

Grocke said that “most lenders are not behaving this way” and many actively support repricing, but the actions of a few were “deeply concerning and risk setting a dangerous precedent”.

When approached for comment, Stryd founder and CEO Ruth Hatherley told The Adviser that although she’s not aware of the problem, she said it would be a worrying trend.

“This does seem like a concerning issue that could cause unnecessary friction between aggregators and lenders which we absolutely want to avoid,” she said.

“I can’t speak for what banks can and can’t do in response to what is being mentioned below but I can confirm Stryd does not interact with or submit pricing requests to the banks on behalf of the broker or the consumer.”

Speaking about the importance of brokers, Hatherley said: “We say the broker is the hero in the relationship with the customer and the lender, and it is them who knows the holistic position of the customer.”

[Related: Brokers seek out rate-tracking tech following RBA cut]