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July 2024
MONTH IN REVIEW

News wrap July 2024

The biggest news stories from the month
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CSLR makes first payments

The Compensation Scheme of Last Resort (CSLR) made its first payments to claimants who suffered financial services misconduct, one of which related to mortgage broking.

A Queensland couple was paid $54,050 after being advised by a mortgage broker to take out a loan that was “inappropriate for their circumstances”.

According to the CSLR, the couple were “taken advantage of by a mortgage broker” after the Australian Financial Complaints Authority (AFCA) found that the broker had falsified their projected income.

The complaint was several years old and reportedly took place before the best interests duty was brought in (in 2021).

The couple told the body: “We were misled by a mortgage broker who we trusted as a friend. Believing he was helping us, we soon realised he was profiting at our expense.

“Lacking industry knowledge, we were vulnerable to his deceit and conflict of interest. He got us a mortgage loan by falsifying projected income to secure a loan we couldn’t afford.”

This payment was one of four of the first payments made under the CSLR system, with a total of $360,000 being paid out to claimants.

The CSLR provides up to $150,000 in compensation to eligible consumers who have experienced misconduct by a financial firm and where the firm has not made recompense (generally, due to insolvency).

The financial services arm has been baulking at the burden of compensating clients for the past misdeeds of companies in their sector, with a campaign being mounted in the financial services space to challenge the levy system (see page 10 for more).

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Government moves to help borrowers get better rates

Federal Treasurer Jim Chalmers has agreed to some of the recommendations from the ACCC Home Loan Price Inquiry to help bank customers get better deals on mortgages and savings accounts through “more choice, lower prices and better services”

The measures announced by the Treasurer include:

Simplifying the process for customers to switch loans through direct and easy access to the forms needed to exit a mortgage i.e. discharge forms.

Working with banks to help enhance how customers are notified about bonus interest rate offers and when an introductory lower interest rate period ends.

Making the banks inform customers when their interest rate changes on their transaction or savings account and improve disclosure requirements for basic deposit products.

Requiring financial product comparison websites to better disclose what determines how products are ranked and the financial relationships with the recommended product providers.

Investigating how behavioural economics and prompts could be used in the banking sector to encourage consumers to switch to cheaper home loans and retail banking products.

Furthermore, the Albanese government has announced a review into the challenges faced by small and medium-sized banks.

“The review will focus on the role small and medium-sized banks play in providing competition in the sector and the regulatory and market trends affecting them,” Chalmers said.

“It will propose ways to improve regulation and ensure that oversight of these banks appropriately balances competition, innovation, and stability.”

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CBA cuts out broker and proprietary channel for new loan offering

The Commonwealth Bank of Australia (CBA) has drawn ire from the broking industry after rolling out a new, digital home loan offering for new-to-bank mortgagors that is only available online.

The Digi Home Loan, only available online to new customers refinancing their home loan from another financial institution, enables borrowers with a loan-to-value ratio under 80 per cent to access a cheaper rate than they can access from either the broker channel or through proprietary bank staff.

The carded rate is 6.15 per cent (6.28 per cent comparison).

While the banking group already has a digital-only direct-to-consumer division that bypasses brokers and its bank branch Unloan, the new CBA offering is the major bank’s first ‘yellow-branded’ mortgage offering that is only available to consumers directly.

As such, the new offer will not only directly compete with the broker and proprietary channels but also with its ‘low-cost’ mortgage brand Unloan (which has been in market since May 2022).

The move to launch a new direct-to-consumer offering under the CBA brand comes as the major bank continues its push to boost its mortgage portfolio and home loan margins.

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A new sub-aggregator launches

Hai Money – a new sub-aggregation group under Finsure – officially launched to market to provide support to “the new generation of brokers” on 7 June.

The new group is led by head of growth and strategy Bruce Li and head of compliance Christina Zhang and was launched after Li identified that a broker’s “biggest worry is a lack of support and resource”.

It currently has around 40 brokers sub-aggregating through it and aims to grow this to 500 brokers over the next five years.

Hai Money, whose name is derived from the concept of the ‘Money Sea’, is particularly targeting young professionals who are just starting in the industry and may require additional support, though its core proposition is to coach brokers of all levels and ‘sail them to success’.

Finsure said it was thrilled to be supporting Hai Money in the “exciting partnership”, adding it was impressed by the hard work and strong dedication Hai Money brought to building a successful broker channel.

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