'Interests of consumers' at risk with latest CHOICE call, says MFAA
The Mortgage & Finance Association of Australia (MFAA) has denounced the consumer advocacy group's submission to ASIC’s review of mortgage broker remuneration, believing it would harm the interests of consumers.
In a joint submission to the Treasury, consumer advocacy group CHOICE, along with the Financial Rights Legal Centre, Consumer Action Law Centre and Financial Counselling Australia, called for:
- the removal of upfront and trail commissions;
- the implementation of fixed fees (via lump sum payments or hourly rates);
- the removal of bonus commissions, bonus payments and soft dollar payments;
- a change in law so brokers have to act in the ‘best interest’ of clients; and
- a requirement that brokers disclose ownership relationships and the lender behind any white-label loan recommended to a consumer.
In reply, the MFAA released a statement noting its disappointment by the “ill-informed” comments, saying the proposals would “significantly harm the interests of consumers”.
MFAA chief executive Mike Felton said, “A fee-for-service model may suit lenders, but it would drive the majority of brokers out of the industry. This removal of access to brokers for Australians would severely reduce competition in the industry, which is something we are trying to avoid for consumers.
“A single, lender-funded, fee-for-service would lead to a standardisation of all fees, which we believe ASIC itself does not support and we believe would also be considered anti-competitive by the ACCC.
“I do not see how removing brokers from the industry, and consolidating power back in the hands of banks, serves the needs of consumers.”
Mr Felton emphasised that the MFAA reiterates that the ASIC report does not recommend the removal of the link between loan size and commission, nor a flat fee-for-service model, nor removal of trail commission.
Mr Felton also cited a 2015 EY study that found that 92 per cent of consumers were ‘satisfied or ‘very satisfied’ with their broker’s performance, and that more than 53 per cent of all mortgages in Australia were written by brokers.
“If you live in a regional or rural area, you may not have access to a bank branch – or you may have access to one bank branch. Brokers provide regional Australians the same access to finance as people who live in inner Sydney or Melbourne and it is critical that we should avoid doing anything to negatively impact that,” Mr Felton added.
“When you are obtaining a mortgage, there is a lot more at stake than just the interest rate. Brokers assess the needs of their customers in detail, both now and into the future and recommend products and lenders that suit these needs.
“All our commissions are fully disclosed, and the MFAA works very hard to ensure that brokers are transparent about how and why they are paid by lenders. We will continue to work with ASIC and Treasury and the Combined Industry Forum made up of a broad range of key industry stakeholders to seek the best possible outcomes for consumers.”
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