Appearing before the House of Representatives standing committee on economics, CEO of the Commonwealth Bank of Australia Matt Comyn was asked why the major lender continues to accept home loan referrals from sources within the professional services industry that do not possess qualifications recognised by the mortgage industry.
Deputy chair of the committee and Labor Party MP Matt Thistlethwaite noted that as part of CBAs program, accountants, solicitors, lawyers, conveyancers, real-estate agents, financial planners and migration agents are eligible to receive financial incentives for referring prospective home loan applicants to the bank.
Mr Thistlethwaite sought clarification regarding what standards such referrers were required to meet before facilitating a home loan.
“What qualifications do these referrers need to provide advice on choice of home loans?” the deputy chair asked.
Mr Comyn replied: “They need to go through an accreditation process [but] the referral program is very small in the context of our overall loan volumes.
“In terms of the detailed accreditation requirements and the ongoing review, I’d probably need to check some of the specifics but definitely there would be both standards on an upfront accreditation perspective as well as on an ongoing basis.”
Mr Thistlethwaite continued: “Do they need to do a course? Do they have to have a particular qualification? Do you give them that? Is that something that they get from an industry body?”
The CBA CEO responded: “I’d need to double-check. They seem to be at arms-length, they have no role from a referral perspective.
“It’s quite different to a mortgage broker, where in that situation, the mortgage broker is acting for the customer in completing the application process.
Mr Comyn added: “It tends to be professionals who are otherwise dealing with customers that may have a home loan need.
“It’s a very simple referral, they have no ongoing role or obligation as part of the application process.”
Mr Thistlethwaite went on to question whether the payment of a fee to non-mortgage industry referrers presented conflicts of interest.
“Do CBA disclose the relationship between the referrer and the bank to the customer and the fees that are paid?” the deputy chair said.
Mr Comyn replied: “Yes, I believe we do. I’m happy to double-check that. One of the areas that we have improved is ensuring that all of the disclosure, including around any commissions or payments that are made are clearer in our loan documentation.”
The Labor Party MP continued: “Don’t you think that relationship is really pushing the boundaries of trust that a person has with say a lawyer, or an accountant, or a conveyancer?”
“If you’re going to someone for legal advice about a particular matter – let’s say it relates to a property – to then be referred to a mortgage broker or a bank on the context of trying to get a loan, [pushes] the boundaries of trust, doesn’t it?” he asked.
“Namely legal advice in the case of a lawyer and accounting advice in the case of an accountant, doesn’t it blur the lines of trust there? It sounds a bit dodgy.”
Mr Comyn responded: “The thrust of your question is something the commission focused on a lot – around conflicts of interest. They are something that are preferably avoided but need to be carefully managed.”
“I think to the heart of your question is making sure there is adequate transparency. As I said it’s a very small proportion.
“I accept the thrust of your question, I believe that those potential conflicts are transparent and clearly managed but I’m also happy to double-check that on notice.”
CBA isn’t the only lender to have faced questioning from the parliamentary committee regarding the use of third-party referrers.
Last October, former NAB CEO Andrew Thorburn was questioned regarding the bank’s Introducer Program, with Mr Thorburn revealing that the lender reduced its network by 90 per cent, from approximately 8,000 introducers to 1,000.