Treasury has invited brokers to give input on the best interests duty and remuneration reforms outlined in a draft bill made available to the public yesterday afternoon.
The National Consumer Credit Protection Amendment (Mortgage Brokers) Bill 2019 will require mortgage brokers to act in the best interests of consumers and also tackle conflicted remuneration within the industry.
The draft bill and associated documents are light in details around the actual implementation of the changes, clarifying several times that the legislation will not have uniform application.
“The duty to act in the best interests of the consumer in relation to credit assistance is a principle-based standard of conduct that applies across a range of activities that licensees and representatives engage in,” reads one of the supporting documents.
“As such, what conduct satisfies the duty will depend on the individual circumstances in which credit assistance is provided to a consumer in relation to a credit contract.
“It is the responsibility of mortgage brokers to ensure that their conduct meets the standard of ‘acting in the best interests of consumers’ in the relevant circumstances.”
While Treasury’s documents did list five types of broad benefits that are not considered conflicted remuneration, the same vagueness coloured this portion of the bill.
“The ability to prescribe by regulation what is and is not conflicted remuneration provides flexibility for the regime to efficiently and effectively respond to changes in industry practice and to ensure that the new regime operates for the benefit of consumers,” it reads.
The bill does venture into more solid territory in some regards; it requires the value of upfront commissions be linked to the amount drawn down by borrowers instead of the loan amount and bans volume-based commissions and payments. Further, it limits the period over which commissions can be clawed back from aggregators and mortgage brokers to two years, and prohibits the cost of clawbacks being passed to consumers.
While the majority of industry organisations have yet to provide comment as they consider the draft bill and its associated documents, NAB has publicly welcomed the news.
“We support the introduction of a best interest duty and will continue to work with the industry on these reforms to drive customer focused outcomes,” said NAB executive Anthony Waldron.
“We want to ensure that the broking industry remains viable and that our customers continue to have the option of choosing a broker to assist them in buying their home,” he added.
The 40-day consultation period is now open, and will remain so until 04 October. Interested parties can submit responses to: ConsumerCredit@treasury.gov.au
The bill and other key documents are accessible at: https://www.treasury.gov.au/consultation/c2019-403520