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After a fresh round of FSI submissions brings vertical integration under further scrutiny, CUA chief executive Chris Whitehead has spoken out about the fact that banks are driving huge volumes of their own products through the aggregation groups they control.
“Those aggregators are actually driving a lot of volume through to their own labelled products, which in essence is the parent’s funding,” Mr Whitehead told Mortgage Business. “It is skewing where the business is going,” he said.
Questioning whether the competitiveness of a lender’s products would win them business on a bank-owned aggregation panel, Mr Whitehead said there is “quite a fair amount of lending going to own-label products”.
“That is one distortion that is occurring within that part of the system,” he said.
This is not the first time Mr Whitehead has made inflammatory comments about bank-owned aggregators.
In June, the CUA chief flagged a potential conflict of interest in the ability of bank-owned aggregators to gain market intelligence on their competitors’ products and pricing.
“I am concerned that there is a real potential for the majors to clone the innovative products of their competitors based on the market intelligence they are gathering,” Mr Whitehead said.
“It is simply the fact they know how well those products are going,” he said.
The regionals have also voiced their concern, claiming in their second FSI submission that while they have “no firm evidence” that vertical integration is distorting the way brokers direct borrowers to lenders, there are clear conflicts of interest.
“For example, where a broker has to pay a fee, or the aggregator retains part of the commission for utilising aggregator platform infrastructure, such as a computer system, this fee could be reduced or the full commission passed through to the broker if the broker originated a loan supplied by the broker’s bank owner,” the submission said.
“This fee discount would not need to be disclosed to the mortgage loan customer, but stands as a clear conflict,” it said.