The Mortgage & Finance Association of Australia (MFAA) has expressed concern about a new industry funding model proposed by the Australian Securities & Investments Commission (ASIC).
The model, which is set to commence in the second half of 2017, hopes to draw funds for ASIC from parties within the finance industry.
“ASIC has long believed that those who generate the need for ASIC’s regulation should pay for it, rather than the Australian public,” said ASIC chairman Greg Medcraft.
“An industry funding model for ASIC is about establishing price signals to drive economic efficiencies in the way resources are allocated within ASIC. Industry funding will also improve ASIC's transparency and accountability. That means business will better understand the job we do by having greater visibility of the cost of doing that job.”
However, Cynthia Grisbrook, chairman for the MFAA, has warned that proposed changes would see licensed mortgage brokers and broker groups paying “up to seven times" the amount for each dollar of credit facilitated compared to lenders.
“We believe that this equates to a ‘tax’ on brokers. Unlike lenders, brokers are – in most cases – unable to pass this additional cost on down the value chain,” she said.
Under the current proposal, licenced brokers and broker groups would face a levy rate of $1,000 plus $1.14 per $10,000 on credit intermediated greater than $100 million. This was compared to $2,000 plus $0.15 per $10,000 facilitated for lenders on credit provided greater than $100 million.
“On ASIC’s current calculations this could leave licensed brokers and aggregators (where applicable) each out of pocket in the amount of $39.90 on an average $350k mortgage given that the levy is charged at multiple points in the value chain. Lenders would be levied $5.25 on the same average $350k transaction,” Grisbrook said.
While these amounts would only be payable once the relevant party has reached the threshold of $100 million – which Grisbrook admitted may not affect brokers directly – she warned that this could impact aggregators who may then expect brokers to carry a portion of the cost.
“Overall, the MFAA believes that the model currently under consideration is inequitable, anticompetitive and unnecessarily complex to administer,” she said.
The proposed changes could also lead to the consolidation of licensing with many individually-licensed brokers handing back their licences and joining broker groups instead. This would reduce industry competition, Grisbrook warned.
“The MFAA is currently working with members and other industry participants to develop an alternative model based on the following four principles: simplicity, equity, achievability and neutrality.”
To get a feel for any unintended consequences, the MFAA is talking with aggregator and member groups, Grisbrook told Australian Broker
“We have a lobbyist panel that’s made up of a lot of aggregators, and we’re sharing information and data to look at different angles.”
The MFAA also has a select group of brokers that it is working with on this. “We’ve sent something out for their input,” she said.
ASIC is currently taking submissions on the proposed funding model through the Treasury website
. The submission process will close on 16 December.
In light of this short deadline, the MFAA has spoken to ASIC and is seeking an extension so that all industry players are on board and are working towards a common goal, Grisbrook said.
“We want everybody who’s involved in this to have a say in it and ensure that we’re all on the same page.”
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