Powered by MOMENTUM MEDIA
subscribe to our newsletter

Regionals call for increased broker disclosure

Australia’s regional lenders have called for increased transparency and better disclosure to ensure customers understand the level of broker independence.

In a combined second submission to the Murray Inquiry, the regionals pointed out that there is currently no obligation on mortgage brokers to disclose the ownership structure of their aggregator.

“This issue has become significant in the context of the financial advice industry where non-transparency of ownership misled consumers over the independent status of financial advisers,” the regionals said.

“The premise of a mortgage broker is that a consumer can receive an objective and independent assessment of what is the best housing loan available for their needs,” they said.

While they claim to have “no firm evidence” that vertical integration is distorting the way brokers’ direct borrowers to lenders, the regionals argued that there may be some means of increasing a broker’s remuneration without having to disclose it to mortgage customers.

Advertisement
Advertisement

“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.

In response to the inquiry’s request for further information on the competition issues surrounding integration, the regionals said integration was a “cause for concern”.

Further, the regionals argued that the majors’ dominance of the third-party channel will negatively impact the role of brokers in driving innovation and consumer welfare.

“The mortgage broker channel drove much of the competition and innovation in the lending market in the period leading up to the GFC,” the submission said.

PROMOTED CONTENT


“The broking industry emerged in the 1990s partly in response to the widespread closure of bank branches,” it said.

“It assisted smaller banks in achieving a nation-wide footprint and was a key player in the period of mortgage finance competition and innovation.

“The extent to which this industry is now becoming captured by large product providers will undermine its potential role in driving competition, innovation and consumer welfare.”

The regionals took issue with the fact that, while calling for further information, the FSI has not outlined options to address concerns over ownership of mortgage brokers by the major banks.

 

Regionals call for increased broker disclosure
mortgagebusiness

Latest News

The neo-lender has announced that its warehouse loan funding facility has been upsized on the back of growth of its loan originations. ...

Illion’s bank statements and data provider and its credit reporting company have been made accredited data recipients under the Consumer D...

ASIC deputy chair Daniel Crennan QC has resigned from his role following Friday’s revelations that the regulator may have incorrectly paid...

FROM THE WEB

Join a group of highly informed brokers.

Broker Pulse, a community-driven knowledge base of lender performance Reveal exactly which lenders are making life easiest for brokers and their clients by taking this monthly survey and joining a group of highly informed brokers who leverage these insights every month.

JOIN NOW
podcast

LATEST PODCAST: Court cases and penalties

Do you expect to see strong uptake of the HomeBuilder scheme?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.