AIPB seeking forum on unethical lender practices
By
Larry Schlesinger
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10/12/2009 9:00:00 AM
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10
comments
The Australian Institute of Professional Brokers (AIPB) is looking to hold an "open industry discussion" to address what it calls unfair and unethical practices affecting brokers.
The AIPB has written to the FBAA, MFAA and Australian Bankers' Association (ABA) calling on them to take part in the forum.
In the letter, sent out on Sunday (6 December) CEO Maria Rigoni wrote: "Some practices have crept into the Financial Services Sector that you may or may not be aware of. These practices have been initiated by and involve a number of members of your organisation.
"Whilst these practices may not be considered illegal we consider that they are unfair and have no ethical, moral or best business practice basis."
The AIPB believes the following nine practices undertaken taken by members of the ABA, MFAA and FBAA are inappropriate. They all relate to lender policies:
- Deciding who can or who can not work as finance broker
- Publicly belittling the reputation of finance broker professionals who choose to work part-time
- Removing access to credit products for those who can not prove they are a full-time broker, work from a commercial office or are part of a national franchise group
- Continually reducing remuneration to finance brokers for completing outsourced lending tasks
- Having unilateral, take it or leave it, unfair commercial agreements in place with aggregators; contracts that can place a finance broker into a position of financial loss if a borrower does not behave in certain ways
- Not disclosing upfront the amount of commission to be paid to third parties for the introduction of business via client connection
- Limiting access to credit products and policies due to volume of business hurdles without accepting responsibility for the product quality, product price and service provided
- Publicly stating their organisation will support the borrowers' choice of distribution channel and not following through the promise in practice
- Charging a finance broker up to $500 to acquire access to a suitable credit product for their client
"We are concerned due to the consequence on the livelihood of honest hardworking individuals and the effect this has on their families and the community as a whole," Rigoni wrote.
"Finance brokers, who operate as an unbiased distribution channel, are being asked to choose between being an ethical operator and financial survival."
She told Broker news FBAA national president Peter White had acknowledged receipt of the letter and would respond shortly.
"No response from the ABA or MFAA yet," she said.
Related stories:
AIPB rails against MFAA/FBAA "dominance" - Alternative industry body, the Australian Institute of Professional Brokers (AIPB), has raised its head above the parapet again to complain of the unhealthy dominance of the MFAA and FBAA
Latest Comments
Total:
10
comment(s)
Honest Broker - 44 years in finance on
11 Dec 2009 12:54 PM
Banks coercing brokers into cross selling insurance products that are un competitive and which in numerous cases are superfluous to the clients needs compounded by the lack of training in these products to presumably keep the broker from knowing that the products are "average". This is NOT looking after customers.
Phil on
11 Dec 2009 01:05 PM
Out of all the issues effecting brokers at the moment, I think these are the least of our worries. Perhaps she would be best to ask brokers what concerns they have. There are always other lenders to take the place of banks, who value our relationship. Its our choice who to deal with. The issue is lack of broker support from MFAA and our Aggregators. Recently I wrote to the MFAA requesting it have a look at the following - SLA''s from lenders to be in writing with ramifications if they do not satisfy these service levels. Including but not limited to suspension from lending in the broker channel until service levels are returned. There are clearly different levels of service between channels.
"Which Bank" are constantly late payers of trailing commissions, I would like interest added to these payments. And don''t tell me its up to my Aggregator to sort it out. Also like the financial planning industry these trailing commissions should be movable/payable between Aggregators or when sold. This should be industry standard practice.
Settlement dates to be exactly that, with automatic penalties added and payable to the vendor, determined by conveyancers/solicitors. This is instead of us "brokers" being hit with penalties through no fault of our own.
Our clients exactly that ours ! You make a point of churning , but its the banks that do all the churning. This is especially true after fixed rate terms end. They call the client with a better deal that I can offer them ( with the same bank ! ) and re-write the loan. Unless the client specifically states in writing that they don''t want to deal with the broker ( and I am not talking about " I was walking past the branch" then the client is ours for life. Any evidence of this and I want the MFAA to take the issue up legally.
Broker clients should be offered the same broker rate products regardless of who writes further business for that client.
The banker on
11 Dec 2009 05:55 PM
I''ve been in the industry for over 12 years. I''ve been a broker, commercial BDM, Resi BDM and an underwriter. It is surprising how many brokers sneak into the system without knowing the basics e.g. what does LVR stand for, how do you read a Balance Sheet, what’s the difference between a sole trader and a company, and the best I’ve had; you didn’t tell me I had to include a refi in the LVR… Restricting and screening the new-comers to the market should be a priority moving forward. I also think its fair that banks expect a certain volume – it is the brokers that lodge 1 or 2 a year that clog up the banks pipelines with re-working deals 2-3 times. Brokers that lodge several deals to a lender a month get to know their systems. I’m all for raising the bar so the industry can move towards the professional recognition the good brokers deserve.
SteveL on
12 Dec 2009 10:12 AM
RE: Phil, sorry, but what you are suggesting will only treat the Symptoms. What AIPB is doing is trying to cure the disease. Fact is we need the big 4 because of their market share and size and other factors, not to mention a level playing field. FYI the AIPB is ONLY made up of Brokers and so your suggestion that she talk to brokers about their concerns is quite moot. If you don''t like what your Aggregator is doing, move or complain. It has been the brokers (OUR) acquiescence that has put us in this position, trusting so-called industry bodies like the MFAA / FBAA / Aggregators to be looking out for our Interests. Quite obviously we have all been taken for a nice long ride!
jimbo on
13 Dec 2009 10:02 PM
phil
l can see your point of view and agree that these issues need urgent attention too.
But why do you fob off Marias issues as being the least of our worries.The issues are serious to say the least
lt is not which issue is more important than the other.
In fact they all stem from the same problem
The real issue is why are there so many serious issues and grievances
and why have these issues never been addressed
and why hasnt anyone come to the forefront to address these issues previously
With such a frighteningly serious list of issues needing to be urgently addressed one might seriously question who is even interested in the finance brokers at all
let alone being representitive of their real interests.
Why is the broker being screwed and no white knight in site.
We need more Marias and Phils to push the agenda emphatically back in the right direction, to rebalance the playing field and above all to have an organisation to address all these issues
Somebody truely and soley to represent the brokers.
We need to stop and think why brokers have been left in such a predicament in the first place since their good work with clients grew this industry in the beginning.
If such serious issues as these surfaced at this point in the historical timeline ,in any other industry ,imagine the uproar.
Patrick on
14 Dec 2009 12:34 PM
Phil (11/12/2009),
Re your comment:
"Also like the financial planning industry these trailing commissions should be movable/payable between Aggregators or when sold. This should be industry standard practice."
I have been crying in the wildness about this issue for years and find most brokers ignorant or naively unconcerned. At last someone who gets it!! Please contact me to explore what we can do to move this issue onto the regulation agenda. The hold of aggregators over brokers when aggregators are no more than a service provider is an outrageously anti competitive impediment to this industry. The necessity to refinance a customer to a new lender to move service fees to a new broker encourages unnecessary churning.
pmcmenam@bigpond.net.au
JIMBO on
15 Dec 2009 12:48 PM
HEY MR BANKER
Surely l deserve the right to retire slowly as is the trend in most industries re retirement issues in this day and age
ln broking this trend equates to part time work and naturally less deals submitted
Why do you want to limit peoples options in retirement?
Sure sack the inefficient but not quality brokers who have planned for many years and choosen to work less AS A TRANSITION TO RETIREMENT!
What are you thinking Mr Banker?
Your views are narrow minded and would hurt many potential part timers who have a better record regarding quality loan submissions than you may have achieved in the industry.
Steve L on
17 Dec 2009 05:52 AM
RE: The Banker. I too have been on all sides of the fence and lets be honest. There are VERY FEW lenders (C/A''s, Underwriters etc) who know what lending is all about. As for brokers, it is the lack of training that is the issue here (Same for Lenders) I am a big believer that those brokers with a "Classical Banking" background are usually the better loan writers....but are poor BROKERS! Yes, there is a HUGE difference. FYI my best ever question at an accreditation was......wait for it......What does LVR stand for?(Again, a basic training and selection issue)
Tuff guy on
17 Dec 2009 12:25 PM
There is no commercial sense behind Maria''s letter. She is simply making popular statements so all the monkeys of the industry jump up and down.
Who is Maria to decide if Aggregator head agreements are unfair? Why should lenders need to guarantee SLA''s, provide certain products and provide equal pricing to brokers than branches? Because brokers want it that way? Give me a break.
Fact is there are many lenders who provide different products, service levels and cheaper pricing. I suspect the only people who are complaining are the ones who refuse to look outside the major banks. These brokers deserve slow turn around times, jacked up pricing and restricted access to products if they are too afraid to offer lenders who do not have the same brand as the big 4.
As sales professionals, you should be able to compare the features and benefits of institutions as well as products. Wake up and stop complaining if you insist on only using the big 4.
Maria talks about remuneration being reduced. Aust banks pay some of the highest commission to brokers. I think we need to get one point straight on trail. Trail is there to service the client on an ongoing basis. 99% of brokers simply don''t use the trail to service their clients. Deals get reworked, don''t settle or get shopped from lender to lender. On this basis it was inevitable commission dropped.
I''d like to know what is Maria proposing to fix the issues - to get banks paying commission, dropping volume requirements, why should banks discriminate against smaller aggregators by less competitive head agreements, what her views are on pricing v cost of funds v commission and why she thinks the banks are obliged to offer her the same deal as the local branch manager.
Martin J. Rollins ALMO Australia on
20 Dec 2009 07:28 PM
Commercial interests (as usual) dominate the way in which Banks modify policy. Aggregators are machines also driven by a single one-dimensional factor, commonly referred to as a vision statement that fundamentally has profit at its centre.
It would appear that we all will have issues surrounding our engagement with these two groups and unfortunately we will also suffer from dialogue and debate that targets our activities and uniques.... one such Unique is the ability for a long suffering broker to migrate into a part-time capacity.
It is incumbent upon those of us with a voice to defend these people (who are in the most-part, professionals) as they transition from full-time to part-time.
There is no difference here from any other industry norm, whereby a person slows down but continues to offer a good service from word-of-mouth referrals.
We owe it to our colleagues to defend their right to part-time work. We owe it to our colleagues to support them, as one day I''m sure it will be your turn and wouldn''t it be nice to see your broker and mortgage manager colleagues argue in your favour.
Enough with the scary stories, this is a forum for us... a forum to discuss why each and every person in this thread deserves to be protected from being demonised just because they have partially retired..... I would argue on all your behalf; even the bankers :)