Liberal U-turn on trail

Federal government no longer to ban trail commissions in 2020

Liberal U-turn on trail


By Madison Utley

Yesterday afternoon, the coalition government announced a dramatic change to its position on the future of trail commissions.

Rather than barring trail commissions on new loans starting in 2020, Treasurer Josh Frydenberg announced that they will be left to operate as is with a review held in three years’ time.

In the statement, mortgage brokers were said to be “critically important” for securing better consumer outcomes in the mortgage market.

“The Government wants to see more mortgage brokers – not less,” the media release stated.

MFAA CEO Mike Felton said, “The announcement reflects the fact that the case for the removal of mortgage broker trail commission has not been made, nor has it been demonstrated that existing trail arrangements lead to poor customer outcomes.”

In past weeks, there has been confusion throughout the broking industry as to what benefit was being sought from eliminating the trail commission payment structure.

“Trail commission for mortgage brokers is deeply misunderstood, and is often confused with ongoing commissions earned by other financial services providers,” Felton said.

He explained, “Trail is contingent income that is only paid to a broker if the loan is not in arrears, is not refinanced and does not involve fraud.

“As such, it is an important control mechanism that aligns the interests of brokers and their customers, and ensures that the broker focuses on the customer relationship rather than simply pursuing the next transaction.”

Aussie Home Loans CEO James Symond also welcomed the news. 

“Today’s announcement is a positive step by the treasurer and provides a good timeframe for this consultation process to take place,” he said.

Meanwhile, FBAA managing director Peter White welcomed the move but said that policy changes were needed to back it.

“The Coalition’s announcement to keep trail commissions has been delivered in a pre-election environment so uncertainty remains about how exactly this will work after the election. Hayne simply didn’t get it but it’s now the case that both sides of politics are now very clear on the importance of mortgage brokers.

“Both the Coalition and Labor recognise that the recommendations of the royal commission would in fact hand power back to the big four banks, which is an absurd result,” he added.


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