The Mortgage & Finance Association of Australia (MFAA) has strongly objected to special levies for mortgage and finance brokers under the Compensation Scheme of Last Resort (CSLR).
In its submission to Treasury’s consultation on the sub-sector levy cap, MFAA argued that brokers should not subsidise unfunded claims from the financial advice sector.
“A number of these proposals would result in other industries subsidising unfunded claims from the advice sector,” said MFAA CEO Anja Pannek (pictured). “As a matter of principle, we do not support cross-subsidisation whatsoever. The integrity of the scheme depends on linking financial responsibility directly to the source of consumer harm.”
Pannek stressed that CSLR must remain sustainable, equitable, and true to its original intent.
“Mortgage and finance brokers have consistently demonstrated strong compliance, low complaint volumes, and solid consumer outcomes under the mortgage broker Best Interests Duty,” she said. “Extending special levies to brokers would be unfair, disproportionate, and inconsistent with the purpose of the CSLR.”
Pannek highlighted that brokers, mostly small businesses, already contribute through the annual levy framework, ASIC levies, AFCA fees, and professional indemnity insurance.
“To ask these small businesses to subsidise unrelated parts of the financial sector through a special levy is inequitable,” she said. “It would not only create unnecessary financial burdens but also risk undermining the compliance frameworks and consumer protections that aggregators and brokers invest in every day.”
MFAA’s submission points out that mortgage and finance brokers facilitate more than three-quarters of all new residential home loans and at least a third of business lending in Australia, supporting over 37,000 jobs and contributing $4.1 billion annually to the economy.
The latest CSLR forecasts show no claims are expected from the broking sector for the relevant period – credit intermediaries are the only sub-sector with no anticipated claims.
Estimates for the third levy period for credit intermediaries have already been revised down by more than 50%, from $216,000 to $73,000.
MFAA urged Treasury to ensure that the CSLR Post-Implementation Review process reinforces fairness and proportionality.
“Special levies must be targeted, evidence-based and proportionate, avoiding cross subsidisation between unrelated sub-sectors,” the association said in the submission.
MFAA also warned that ministerial discretion should not create an ongoing precedent for shifting costs onto sectors with no connection to misconduct or unpaid determinations.
“Mortgage and finance brokers deliver high-quality outcomes for consumers and play an essential role in driving competition and choice in the financial system,” Pannek said.
While brokers benefit from the reduced levy, the unresolved $47.3 million special levy for the advice sector highlights the need for future cost allocations to reflect brokers’ low risk.
“The CSLR was never intended to impose costs on sectors that are not the source of consumer harm,” Pannek said. “We urge the minister to ensure any levy arrangements remain consistent with the scheme’s original purpose.”
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