The Finance Brokers Association of Australia (FBAA) has rejected claims in the royal commission interim report that lenders paying value-based upfront and trail commissions could be in breach of section 47(1)(b) of the National Consumer Credit Protection Act (NCCP).
FBAA executive director Peter White said the interim report did not find any systemic evidence to suggest that conflict of interest in the payment of commissions to brokers directly disadvantages clients.
Mr White also took exception to any suggestion that loans sourced for clients with higher leverage are in themselves a bad thing. “It’s the brokers duty to put the client’s interest first and to meet, if not exceed, their expectations.
“In meeting client needs brokers are often asked to source higher leverage loans to appropriately support their needs, taking into account a client’s debt levels and loan to valuation ratios.
“It’s a broker’s ability to source a specific loan product to suit their client’s specific needs that gives us a market advantage.”
In his interim report commissioner Hayne said licensees must make adequate arrangements to ensure clients are not disadvantaged by any conflict of interest that may arise in relation to credit activities.
Mr White said adequate arrangements are already in place and so are penalties.
“The commissioner pointed out that a breach of the NCCP is not an offence or open to civil penalty. I would argue that the cancellation or suspension of a broker’s licence by ASIC is a substantial penalty in itself.”
Mr White said brokers were at the forefront of efforts to improve service delivery and remuneration structures and have been working collaboratively with regulators.