The national peak body representing finance and mortgage brokers has warned both the Federal Government and Opposition that they would be betraying borrowers if they change the remuneration structure for brokers.
Finance Brokers Association of Australia (FBAA) managing director Peter White said if implemented, the recommendations from Commissioner Kenneth Hayne would send Australia back to the dark ages where a few banks held all the power.
Mr White pointed to comments from respected finance commentator Peter Switzer today who called the royal commission’s plans for mortgage brokers “crazy”.
“The broking sector has undergone reviews from ASIC and the Productivity Commission and each time the recommendation has been not to change the structure,” Mr White explained.
“Mortgage brokers provide competition and choice, and give borrowers lending options that most people are just not aware of, and these options enable borrowers to get better outcomes.”
He also said commentary that criticised broker commissions was misinformed and hypocritical.
“Talk about conflicted commissions misses the point, as every business person’s remuneration is conflicted because everyone wants to do business.
“The issue is transparency, and brokers already disclose commission under the National Consumer Credit Act, which was established after lobbying from our industry.
“Unlike the banks which have done business for years under a shroud of secrecy, the broking industry has pushed for openness and transparency, better business practices, and tough penalties for any broker that does the wrong thing.”
He said talk that the current system incentivises brokers to write higher loans is “just rubbish”.
“The average broker-written loan is $30,000 higher than the average bank-written loan for a variety of reasons which range from the income level of the borrower to high percentage of loans written by brokers, and the difference in commission is equivalent to a cup of coffee per month – hardly an incentive!
“Brokers service people, and people want to deal with brokers and they are happy with the commission structure. Fiddling with this isn’t going to help borrowers, it’s going to hurt them.”