There is a risk that the big banks are using brokers as a shield to divert attention away from allegations, according to a statement released by the Mortgage and Finance Association of Australia (MFAA).
Allegations the statement refers to include “stifling of competition and massive community trust deficit”. Mortgage brokers have been particularly in the spotlight following the first round of public hearings at the Royal Commission.
MFAA has also said that statements made by Westpac’s CEO Brian Hartzer at the Australian Financial Review Banking and Wealth Summit last week appear to be “entirely self-serving”. Hartzer suggested that brokers could consider charging customers directly for their services, to encourage more transparency.
It adds: “This is not a viable solution to improve transparency around broker commissions, fees and costs to help consumers to make more informed choices. It will simply tip the balance back in favour of branch-based lending by making it significantly more expensive for a customer to use a broker rather than a bank branch to get a home loan.
“Smaller lenders who do not have branch networks will be pushed out of the market, reducing competition, and allowing the big banks to restore the massive net margins they had on mortgage products before broking gave consumers access to competitive financial services.”
MFAA accuses the current scrutiny around mortgage brokers of being ill-informed. The consumer fee for service remuneration model was ruled out by the Combined Industry Form (CIF), The Australian Securities and Investment Commission (ASIC), and the Australian Bankers’ Association (ABA).
The association’s statement also added: “While a consumer fee for service model would harm customers (especially in rural and regional Australia), reduce competition and hurt broker small businesses, it would significantly benefit the big banks, providing them with an unassailable stranglehold on the home lending market and interest rates.
“Let’s be clear: brokers deliver enormous economic value to the banks, and now some big banks want customers to pay for it. This is like asking a home buyer to pay the auctioneer and vendor’s selling costs.”