The MFAA and FBAA have defended brokers in another inflammatory article published in the mainstream media – this time targeting commissions.
The report, ‘Time mortgage broker commissions were revisited’, is the second article published by the Australian Financial Review
(AFR), in which the national news service directly targets mortgage brokers and questions their ethics.
This report claims that the first AFR
report, ‘Uncovering the big Aussie short
’ – in which a hedge fund manager and economist posing as a low income couple claimed mortgage brokers in the western suburbs of Sydney encouraged them to lie on loan application documents – did a “positive service” to the country.
“Mortgage broking is one of the last bastions of unethical sales practices. Regulatory crackdowns have cleaned up the financial planning industry and should soon remove the incentives for bad behaviour in life insurance,” the AFR
“Mortgage brokers are a favoured distribution network for the major banks because they are so effective in generating loan growth.”
The reason, according to the AFR, is because of conflicted up-front and trailing commissions which are based on the loan amount.
“There are incentives to sign up customers and encourage them to pay as much as possible for a property.”
But the two broker associations have come out swinging. Siobhan Hayden, the chief executive of the MFAA, said the opinion piece completely disregards the facts.
“It is very disappointing to see personal opinion pieces, which are not supported by evidence and directly admonish a profession being published by a reputable publication.
“The MFAA has a strong working relationship with ASIC and is working closely with the industry regulator on the Inquiry into Broker Remuneration. The scope for the inquiry is publicly available to the Australian Financial Review.”
The MFAA also wants it noted that the industry has been reviewed many times and that it bears a high degree of regulatory oversight under NCCP legislation, which was introduced in 2010. The industry is also held to high standards through compulsory membership with an industry association.
“We are more than happy to defend the professional standards of this industry. Our membership is strongly supported by the lending community, we enforce a higher education and compliance standard for MFAA members than required by ASIC,” Hayden said.
“We also have an independent tribunal for investigation of consumer complaints or alleged unethical behaviour. The MFAA is always willing to contribute to media review but feels that the lack of consultation reflected in this article demonstrates a lack of balance that is disingenuous and is utterly contradicted by articles in the same issue of the AFR.”
The chief executive of the FBAA, Peter White, has also came out in defence of mortgage brokers, saying the article is self-serving drivel. He also wanted to point the AFR
in the direction of the NCCP.
“For Boyd to label mortgage broking as ‘one of the last bastions of unethical sales practices’ shows his lack of credibility in this area. Finance brokers were brought under the NCCP in 2010 which dramatically changed the landscape in a positive way.
“This requires transparency towards borrowers, the upholding of major responsible lending obligations and disclosures to the highest level ever seen in the history of lending in Australia.”
In fact, says White, it was mortgage brokers who brought greater competition and delivered greater choice to consumers.
“It was finance brokers in the 1990s that brought service levels that borrowers had never experienced in the past, plus product diversification and interest rate competitiveness as well as professional knowledge not available elsewhere.”
He also just flat out labelled the article as false.
“Boyd’s further statement that ‘there are incentives to sign up customers and encourage them to pay as much as possible for a property’ is 100% wrong. I have never heard of this practice in my 37 years of being in the industry.
“Finally, his claim that “banks have been complicit in the wayward practices of mortgage brokers by lowering their mortgage lending standards” is also completely false. Finance brokers can only do what the lenders direct can be done under their credit policies.”