A lawyer is calling on aggregators and lenders to assess how they deal with misconduct after receiving a series of legal enquiries from brokers who say they have been denied separation letters.
Matthew Bransgrove, partner at the law firm Bransgroves, wrote to more than 40 aggregators and lenders last week and followed up today with a letter to brokers, which he said has been distributed to 8,000 industry members.
Bransgrove claimed brokers are being stripped of their accreditation for alleged misconduct that is not committed to writing and that, since the royal commission, the number of brokers seeking legal advice on the issue had increased.
The brokers in question are then refused the paperwork necessary to join a new aggregation group, effectively locking them out of the industry and creating what he has termed a “Hollywood blacklist”.
From a legal perspective, Bransgrove concluded that the behaviour is “anticompetitive”, and he said the practice is “ruining innocent broker’s lives”.
“This is an extra-judicial process that bypasses the formal mechanisms available through the MFAA. Aggregators and lenders could use the MFAA, they could report brokers to ASIC, but they choose to do neither,” he explains.
His letter begins, “We are writing because we have noticed an increasing trend for brokers to be unfairly refused separation letters containing the no adverse circumstances notation.”
Speaking to Australian Broker, Bransgrove added, “For many years the banks and major aggregators have been operating a Hollywood blacklist to deal with brokers who they individually deem warrant expulsion from the industry.
“This exposes brokers to very unfair results as they are given no chance to defend themselves before an independent umpire,” he added.
To address the situation, Bransgrove is calling for aggregators to add a due process clause to their broker deeds whereby they “agree that they will give a no adverse circumstances or due process when the broker leaves”.
“They also need to stand up to the banks and ask for evidence of wrongdoing before treating the broker as a criminal,” he continued.
Despite highlighting that the MFAA is bypassed during the alleged process, Bransgrove’s letter concludes with a plea for the association to step in.
In response, MFAA CEO Mike Felton said the association is focused on ensuring fair practice across the industry.
“The MFAA strongly believes that any lender or aggregator with an allegation of misconduct by an MFAA member should refer the matter to the MFAA, to ensure that an independent process is triggered to deal with it and come to an appropriate, peer-reviewed outcome,” he said.
“With respect to matters involving misconduct, the MFAA’s main focus is on ensuring that the process is fair while delivering natural justice with the ultimate objectives of protecting consumers and the reputation of the finance broking industry,” he added.
However, in the case of contractual disputes these fall outside of the MFAA’s jurisdiction and must be handled by the courts.
“Royal commission recommendation 1.6 called for greater investigation and detection of misconduct, and for transparency of recording and reporting of misconduct matters. As the Combined Industry Forum works through the process of addressing this recommendation, the MFAA is continuing to advocate for the greater use of its disciplinary system and its tribunal by lenders and aggregators, to ensure that those brokers who are alleged to have been involved in misconduct are subject to a procedure that is independent, fair and provides natural justice to all parties,” Felton concluded.
Australian Broker has contacted several aggregation groups, and all have denied that the alleged collusion occurs.
There will be more on this story as it develops.