Media Releases

Finance brokers back new financial complaints authority

The new Australian Financial Complaints Authority (AFCA) being planned by the federal government will be good for consumers, according to the peak body representing Australia’s finance brokers, the Finance Brokers Association of Australia (FBAA). The formation of AFCA has been criticised in the media by some smaller financial services firms and the Credit & Insurance Ombudsman (CIO), who claim it will favour the big banks and therefore won’t be trusted. However, FBAA executive director Peter White said the new body will be focused on even better outcomes for small businesses and consumer borrowers, as has always been the case, not associations. “The amalgamation of the Financial Ombudsman Service (FOS), the CIO and the Superannuation Complaints Tribunal (SCT) will improve systems that will lead to better consumer outcomes. “We believe it will speed up turnaround times and streamline case management processes without the non-alignment of processes by two separate ombudsmen. “The CIO needs to remember the ombudsman service is about borrower disputes being resolved and not industry bodies. There is no basis or substance to call for a royal commission into this.” Mr White has also described as baseless, the criticisms by smaller firms that they will end up subsidising a scheme which accommodates the major banks. “There is no evidence at all to support those claims.” He said the FBAA fully supports the government’s initiative to create...

Union broker pay plan misses the mark

A suggestion by the Finance Sector Union (FSU) to restructure brokers’ incomes is flawed, according to the Finance Brokers Association of Australia (FBAA). The union believes there should be a universal income structure for bank employed mortgage salespeople and external mortgage brokers, however, FBAA executive director Peter White said a fee-for-service model in home loan broking won’t work. “A broker is doing a large part of the work for the lender, therefore, it is commercially appropriate for the bank to pay them a commission for doing that work,” said Mr White. He says while the union is very proactive in protecting the income rights of bank employees, it shouldn’t lump financial planners together with finance brokers because the two are vastly different. “A finance broker does not give advice, as per the NCCP, but offers guidance on lending options and then assists a client through the application process to settlement, as per the lenders credit rules. “Financial planners give advice and need to be independent as they can influence an investment market’s performance – returns and outcomes, whereas home loan brokers cannot influence any market outcomes.” Mr White says there are around 25,000 brokers in Australia and the FSU proposal to restructure their incomes in this fashion would have a serious and negative financial impact on them. “It potentially could cause brokers’ businesses to collapse and throw employees out of work.” He says the FSU wants to protect the income and employment rights of banking employees, but brokers also employ people, so their staff employment rights must also be protected in addition to their...

Banks urged not to pass on tax costs to borrowers

A new $6.2 billion levy over four years on the top five banks contained in the federal budget has been cautiously welcomed by the Finance Brokers Association of Australia (FBAA), but it warns the decision could backfire on borrowers if the banks react badly. FBAA executive director Peter White said while the government’s move is aimed at helping smaller banks compete with the big five, there is a risk the big banks could increase interest rates to cover the tax. “I dare say the banks won’t simply absorb this levy, and if they don’t, this will be a bad outcome for home loan and business borrowers. “It’s possible the banks could raise interest rates and that could put housing affordability out of the reach of more borrowers, so we are urging the banks to give an ironclad guarantee that they won’t pass on those costs.” Meantime, Mr White hails as a good move the budget initiative to bring forward a comprehensive package of reforms to strengthen bank accountability and competition. “The banks will need to be more accountable with the government to legislate a new banking executive accountability regime. “It will increase competition in the financial system and improve consumer choices.” Other components of the budget relating to small business also meet the FBAA’s approval, including the extension of the $20,000 immediate tax asset write-off for businesses with up to $10 million turnover. The tax rate for small business is now at 27.5 per cent with the government aiming to lower that to 15 per cent. Mr White said the budget also contained positive news for finance and mortgage...

APRA loan restrictions will hurt small business

The Finance Brokers Association of Australia (FBAA) has criticised the Australian Prudential Regulation Authority (APRA) for clamping down on interest-only loans, saying it will hurt small business. APRA has announced measures to limit the flow of new interest-only mortgages by banks to 30 per cent. FBAA executive director Peter White says APRA is pushing home loan borrowers into principal and interest loans and away from interest-only loans, because the latter are generally there for people with a business, investment, or bridging loan need. “It’s an arbitrary move,” said Mr White. “APRA has lumped everyone in the same basket, which means small businesses could have restricted access to appropriate styled debt. “I mentioned this to the Prime Minister at a business lunch two weeks ago and he was understanding of this consideration.” Mr White says APRA has overstepped the mark without considering the consequences. “If small business people can’t get access to the right style of debt, it may mean they can’t gear their business to expand, take up new contract opportunities, or maintain current staffing levels. “It could push more people onto unemployment benefits because small business won’t be able to hire more staff. “This may mean in the long-term people won’t be able to save as much, and therefore in retirement, will have to rely on the pension.” Mr White suggests neither of these are good outcomes, especially for governments trying to reduce stress on budgets and...

Senate recognises FBAA’s financial sector leadership

The Finance Brokers Association of Australia (FBAA) has been recognised for its leadership and standing in the financial sector by receiving an exclusive invitation to attend the Senate Economics References Committee Inquiry into consumer protection in the banking, insurance and financial sector. The FBAA is the only group representing the lending sector to be invited to give input to the Inquiry. “Being asked to attend the Inquiry is an important opportunity,” said executive director Peter White. “It’s crucial, not just for brokers but also for consumers, that the Inquiry sets out appropriate guidelines to be followed in the future. “Being there gives us the opportunity to offer advice and answer questions based on our combined decades of practical experience in the sector.” Meantime, for the second straight year, the FBAA has received an invitation from the Treasury Department to enter the stakeholder budget lockup in May. “This opportunity is limited to select groups and people, so we are very honoured to be invited again to participate.” The FBAA executive director will be a guest for the seventh year in a row of senior senators at a dinner in the Great Hall of Parliament for the handing down of the federal budget by Treasurer Scott Morrison. Mr White is also scheduled to have a series of meetings with ASIC in the coming month to discuss the home loan commission review and the Sedgwick...

Warning to borrowers – don’t be influenced by lender incentives

Australia’s peak body representing finance brokers has urged borrowers to avoid choosing a mortgage based on incentives offered by lenders, as it could lead to unsuitable loans. Executive director of the Finance Brokers Association of Australia (FBAA) Peter White, says reports that incentives such as cash discounts and overseas trips are being dangled in front of customers deemed to be low risk or high-net-worth borrowers, are worrying. He said borrowers with job security and good credit are being targeted. “As nothing is free these days, banks that offer incentives to borrowers need to be careful that they are not overlooking what’s in the best interests of their customers,” he said. “A mortgage is a long-term commitment and it is foolish to lock yourself into a contract for such a large amount of money for the sake of a short term financial benefit. “You also need to read the fine print as you may be agreeing to be inundated with emails for insurances, financial planning, or other cross-promotional services by the lender.” He said while offering incentives is not necessarily unethical, it could be considered a grey area. “ASIC and Treasury via the Minister for Revenue and Financial Services are looking at this right now under the NCCP, as incentives potentially put at risk consumers’ best outcomes.” He also questioned the need for lenders to go down this route. “If the lender has the margin for incentives like this, you’d naturally ask why they can’t provide a lower interest rate or other long-term benefits.” Mr White says the practice is yet another reason finance brokers now arrange over half the mortgages...

FBAA says finance brokers can dominate home loan market

The Finance Brokers Association of Australia (FBAA) says the industry can achieve a 70 per cent or higher market share of the home loan business, and 50 per cent of commercial and business lending origination. The association bases its prediction on its Global Research Paper, which was the result of extensive research on how home loans are conducted around the world. “Brokers in Australia have every opportunity to follow markets like the UK and dramatically increase origination market share of home loans written,” said FBAA executive director Peter White. “The high level of professionalism and best practice engaged in Australia under our regulations, and genuine concerns for skilled conduct producing best outcomes for borrowers, is a recipe for more and more borrowers using brokers.” As an advisory board member with the Small Business Association of Australia (SBAA), Mr White sees opportunities for brokers in the small business sector to improve the service they currently provide, and believes broker services are underutilised. “Many brokers are very proficient at business and commercial lending, but they need stronger knowledge skill-sets that deepen their understanding of how those loans function within business markets. “If you are dealing with a borrower who is in an aged care facility, you need to understand the aged care market and its needs. Same with hoteliers, restauranteurs and motel owners, so you can speak their language and gain their respect. “When you actually know their industry and market, you will own the right to their business.” The FBAA will be conducting a Commercial & Business Lending Master Class series this year via the FBAA’s Commercial & Equipment Finance Committee,...

ASIC submission period too long

The Finance Brokers Association of Australia (FBAA) believes the three-month period set aside for submissions on the Australian Securities and Investments Commission (ASIC) report into mortgage broker home loan remuneration is far too long. Interested parties have until June 30, 2017 to give their feedback to the Treasury Department. “This is a poor outcome and the length of time is completely unnecessary,” said FBAA executive director Peter White. “Six to eight weeks would be more than enough time to get it done. “This extracted period only creates longer industry angst as we wait for a conclusion of outcomes and progression of discussions.” The association also believes that the federal government has erred in tasking Treasury with accepting submissions, suggesting that it is the wrong department to deal with them. “This should have been put back into the hands of ASIC to progress industry stakeholder discussions, as they are far more informed about the industry and the current remuneration issues,” continued Mr White. “The government needs to ensure they do not destroy small business confidence by engaging poor processes that create no additional benefit for regulatory outcomes.” He said bringing Treasury into the mix at the last minute creates more unnecessary work for the industry. “ASIC, not Treasury did the review, so Treasury has no base or depth of knowledge of the 27-year plus history of finance broking as ASIC now...

ASIC broker remuneration report positive – FBAA

The Finance Brokers Association of Australia (FBAA) says the ASIC report on finance broker remuneration that was released yesterday is positive for the industry and an endorsement of the FBAA’s position and public comments. FBAA executive director Peter White said he was privileged to have viewed the key findings and proposals under confidence four weeks ago. “In general it is a very good report and supports what I have said for the past twelve months or more in that base-line commissions are perfectly responsible in our market place and they should not change, while incentives that promote volumes risk poor consumer outcomes and must go. “Truth comes through transparency, and therefore ownerships and disclosures proves that we as an industry have nothing to hide. However he said that whether some of the data goes far enough to form conclusive outcomes, is a question that needs to be discussed further. “There are a couple of such matters that we have already raised and will be further discussing with Treasury.” Mr White said the FBAA is continuing in-depth discussions with ASIC on several fronts, and is formulating its response to Treasury in conjunction with input from members and key industry stakeholders. “We look forward to further discussions with Treasury and we continue to be confident in the positive and sound position brokers’ value-proposition holds for borrowers. “For now we need to absorb all that is within this paper and make informed positive responses knowing that fundamentally we have a strong, solid industry that will have every opportunity to attain over 70 per cent origination market share in home lending in...
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