Brokers, lenders and aggregators have four working days left to have their say on the best interests duty and remuneration reforms outlined in the draft NCCP Amendment (Mortgage Brokers) Bill 2019.
In the consultation process, Treasury said it seeks stakeholder views on “the exposure draft Bill, exposure draft Regulations and draft explanatory material that implements these reforms”.
The consultation period gives the third-party channel an unprecedented opportunity to shape the future of lending following a year of regulatory change, and many have already told Australian Broker they intend to make their voices heard.
“Those who ignore the debate may find themselves feeling confused and concerned about any change,” said Aaron Milburn, director of sales and distribution at Pepper Money.
“Workable regulations come from proper consultation with the industry – lenders, brokers and consumers alike. That way, any unintended consequences can be identified and worked through. Broker’s should take the opportunity to have their say. Engaging with their industry associations and staying across the debate will help develop the most appropriate outcomes,” he added.
Released by Treasury for consultation on 26 August, the Bill provides legislative frameworks for five key recommendations from the royal commission:
• Mortgage brokers must act in the best interests of consumers when providing credit assistance, in relation to credit contracts. Where there is a conflict of interest, mortgage brokers must give priority to the interests of their customers;
• The value of upfront commissions will be linked to the amount drawn down (net of offset) instead of the loan amount;
• Campaign- and volume-based commissions and payments will be banned;
• ‘Soft dollar’ benefits will be capped and clear regulations applied to activities that constitute such benefits, including entertainment and legitimate educational activities.
• The period over which commissions can be subject to clawback from aggregators and mortgage brokers will be limited to two years. Passing the cost of clawbacks on to consumers will be prohibited.
The FBAA is among those submitting a response and managing director Peter White said it will place focus on “terminologies that need to be removed”, as well as other areas.
“We will [also] look at the maximum penalty units applied for breach of the best interest duty, how clawbacks impact best interest duty and acting responsibly in lending. Additionally, the three-year review needs to align with the agreed upon focus to ensure we can have confidence in the future of our industry,” said White.
Meanwhile, in a letter to members last month, Mortgage and Finance Association of Australia (MFAA) CEO Mike Felton said the group is seeking legal advice to assist in “fully determining the impacts and potential unintended consequences” of the Bill.
If accepted, Treasury said it will publish “most submissions” on its website, including the name of the submitter.
Its advice continued, “If your submission is published, the information in it, including your name can be searched for on the internet. You cannot withdraw or alter your submission once the committee has published it.”
Interested parties can respond before 4 October, via [email protected]