The Finance Brokers Association of Australia (FBAA) has lodged its response to the interim report of the royal commission into the banking, superannuation and financial services industry.
The commission tabled its interim report on September 28, 2018 providing interested parties with a month to make submissions in response.
FBAA managing director Peter White said their substantive submission focuses on disclosure obligations, remuneration structures, compliance with existing laws, and the commission’s call for greater regulation.
“The association agrees with the commission’s interim report that improvements can be made but we also agree that new laws or regulations aren’t necessarily the answer.
“Some of the responses to the royal commission have verged on emotional or value proposition statements, and while most have merit we have deliberately taken a strong legal approach to our language to ensure our messages are clearly understood by the commissioner, a High-Court Judge.”
One area addressed in the submission is the issue of full disclosure of remuneration paid to brokers by financiers. The FBAA submission rejected any suggestion of a need for further disclosure measures.
“Already brokers have to provide lengthy disclosure documents, while the National Consumer Credit Protection Act 2010 (NCCPA) ensures clients are well-informed about the costs and commissions.
“We don’t want brokers to be forced into even more documentary disclosure and that view accords with ASIC’s findings that consumers can disengage because of information overload.”
The association takes on the issue of broker remuneration concluding that the current structure is superior to other models and any change may be detrimental.
“We are concerned that a change to the existing structure without fully understanding the impact of any proposed model may simply disrupt a stable and important profession with no corresponding improvement,” Mr White said.
“The majority of misconduct has been due to market participants failing to follow existing laws. This shows that further reforms should not be contemplated until there is compliance with current laws.”
The FBAA disputes claims that lenders paying value-based upfront and trail commissions is a possible breach of the NCCPA.
“The relevant section does not prohibit conflicts of interest, only those causing disadvantage, yet the term disadvantage is imperfect and can’t be relied on.
“It’s our submission that the laws already in place strike an appropriate balance.”
The final report from the commission is due by February 1, 2019.