MFAA and FBAA defend brokers against RBA commission claim

by Julia Corderoy26 Mar 2015
Both the MFAA and the FBAA have come out in defence of brokers after the Reserve Bank warned banks over increasing broker commissions, saying it could create “significant amounts” of risky lending.

Peter White, chief executive of the FBAA said the fact that brokers have been writing around 50% of the home loan market for some time is proof of the diligence, professionalism and ethics in the industry. White says brokers have actually increased the professionalism within the finance sector.

“Finance brokers are far better educated across more loan products and around compliance with laws under the NCCP,” he said.

“It is important to remember that it was the advent of finance brokers in the early ’90’s that bought service standards that borrowers wanted, when the banks were shutting branches.

“It is finance brokers that have delivered not only the service demanded by the market but also the availability of a range of products unseen in this country's lending past.”

According to Siobhan Hayden, chief executive of the MFAA, the number of brokers that have been investigated or convicted is less than 0.5% of the total brokers in the market.

“Loans introduced through the broker channel carry less risk than those sought by consumers directly from lenders. Brokers must meet significant barriers to ensure that a loan will be made by a lender and on many occasions, loans declined via the broker channel are then made directly by lenders,” she said.

In fact, branch inducements are more at risk of a conflict of interest than broker commissions, says Hayden.

“Employees within the direct channel are often remunerated based upon achievement of total monthly lending volumes and are also responsible for the approval of the same loans, demonstrating a clear conflict of interest,” she said.

“Brokers are not remunerated if and when a loan defaults or is in slight arrears. If this does occur in the short term the broker involved is likely to actually lose all or most of his/her income through a ‘clawback’ provision by the lender.”


  • by The Observer 26/03/2015 11:19:24 AM

    Here are your MFAA & FBAA fees at work.

  • by SA Broker 26/03/2015 11:27:17 AM

    Uneducated and poorly researched by RBA.

    Branch lenders can also approve loans under their own DLA if credit score allows. Every loan a broker does gets scrutinized by a Credit Manager.

    RBA should have to back up comments with evidence.

  • by Rocket Scientist 26/03/2015 11:34:28 AM

    How can broker loans be more risky when the bank still needs to assess the application and approve it? Come on RBA you're better than that!