On Monday, August 26, Treasury released the draft legislation containing a best interests duty and remuneration reforms for mortgage brokers.
While much of the industry is still working through the finer points of the National Consumer Credit Protection Amendment (Mortgage Brokers) Bill 2019, several participants have weighed in, some welcoming the legislation while others expressed more caution.
In a letter to its members, 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.
“The reforms proposed follow the ASIC Remuneration Review, Productivity Commission Review and Royal Commission. In many cases, they are giving legislative effect to reforms already implemented by the CIF,” Felton’s letter noted.
However, the MFAA still plans to consult with aggregators, as well as arrange broker roundtables to talk through the bill and its possible ramifications. The feedback will help shape the written submission the MFAA plans to send to Treasury by 4 October 2019, while the association plans to continue its engagement throughout the legislative process.
Australian Finance Group (AFG) has “welcomed the certainty provided” by the government’s royal commission implementation roadmap as a whole, Treasury’s draft bill being viewed as a natural step in the process.
Noting that the industry started implementing relevant changes over two years ago, AFG CEO David Bailey said, “Industry has already moved on defining ‘good customer outcomes’, and we see the formalisation of a best interests duty as an extension of the work that is underway.
“We have always maintained that it is in a broker’s best interests to ensure the customer’s needs are placed first and foremost. Without that focus, a broker would not have a sustainable business.
“We look forward to working with the government on the detail of the draft bill to ensure the effective force mortgage brokers deliver to competition, choice and lower borrowing costs is maintained,” he added.
Mortgage broker Aussie Home Loans was among the first to voice support for the bill.
“Aussie welcomes the government’s recognition of the brokers’ role in ensuring competition in the home lending sector and the consultation it has had with Aussie and the rest of the industry before introducing the bill,” said Aussie chief customer officer, David Smith.
“This bill is confirmation of our operating philosophy and systems. Aussie has a panel of 24 lenders and we don’t favour one lender over another based on commercial factors when providing our customers with…options in finding a right outcome for home loan financing.
“We look forward to consulting further with the federal government and regulators to ensure a great outcome for customers and mortgage brokers.”
NAB responded to the draft bill just hours after it was released.
“NAB welcomes the mortgage broker reforms announced by the Treasurer [Monday],” said NAB GM of broker partnerships, Anthony Waldron.
“We were one of the first banks to make positive changes to several areas including commissions, incentives and education as outlined in the ASIC Broker Remuneration Review.
“Today’s announcement regarding remuneration are in line with changes we introduced in November 2018 to the calculation of upfront broker commissions for home loans.
“Through our role in the Combined Industry Forum (CIF), we continue to work to raise the bar in the broking industry to ensure customers get the best outcome for their home lending needs.
“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,” he said.