The chairman of the Australian Securities and Investments Commission (ASIC), Greg Medcraft, has defended the broker channel after the release of the regulator’s controversial Review of Mortgage Broker Remuneration.
“The channel shouldn’t necessarily be blamed. What we’ve got to remember here at the end of the day is the lenders themselves are still responsible for the lending,” he told ABC’s The Business
on Thursday (16 March).
Responding to a question about ASIC’s findings that broker originated loans tended to be higher value, interest-only or with higher LVRs, he said the focus should still be on the lender rather than the broker.
“Let’s not blame the brokers. They [the banks] are still responsible. They still have responsible lending obligations. Let’s look at not the channel but back to where the lending occurs. That’s most important.”
He praised the broker community for delivering great consumer outcomes as well as competition. However, he said that the current commission structure for brokers needed some tweaking as it was clear that remuneration structures were a driving force behind behaviour.
“The standard commission structure is OK. It needs fine tuning perhaps to think about the issue of looking at how you pay. Perhaps, rather than paying on amount, you’re paying on things like LVR or risk.”
Volume bonuses should also be scrapped, he said, as they were not compatible with good consumer outcomes or the creation of a level playing field in terms of competition.
Martin North, principal of Digital Finance Analytics (DFA), has also made a statement around broker’s valuable role within the community.
In a blog post responding to the ASIC review, North wrote that “consumers get more responsive assistance and access to industry knowledge via a broker, and our surveys indicate much higher satisfaction ratings than those going direct to a bank”.
“Because brokers look across lenders, they should have access to a wider range of options, and (perhaps) better pricing. Different types of customers use brokers differently. But there is a valid and important role for brokers.”
He said that while ASIC has not suggested the removal of the commission model, they have proposed significant changes to it with ongoing consultation around the nature of these changes expected.
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