Results from the previous reviews of the mortgage broking industry will stand it in good stead as the royal commission gets underway, said Mike Felton, CEO of the Mortgage & Finance Association of Australia.
The royal commission into the banking, superannuation and financial services industry will hold an initial public hearing on 12 February in Melbourne.
“I think it’s worth noting that we’ve had two significant reviews in the past 18 months – the ASIC broker remuneration review and the Sedgwick report – and neither of these found systemic poor outcomes or systemic harm to consumers,” Felton said.
Lenders, on the other hand, are expected to get the heat during the hearing as remuneration is one of the areas the commission will focus on, based on the questions it asks in the submissions of evidence.
While some industry players previously expressed doubt that the commission would cover mortgage brokers in its investigation, brokers’ eventual inclusion did not come as a surprise to the MFAA.
“Given than 55.7% of all mortgage lending is originated through brokers, we always expected that aspects of mortgage broking will be looked at by the royal commission,” said Felton.
Brokers’ inclusion was confirmed when Treasurer Scott Morrison and Attorney-General George Brandis released a joint statement in December identifying “intermediaries, such as mortgage brokers” as among the entities the commission would look into.
Felton said the mortgage broking industry will fully engage with the process and respond to the commission as required.
Similarly, the Commercial & Asset Finance Brokers Association believes there is no cause for concern among its members and that there is no reason for their businesses to come under the spotlight.
“While we will be watching the royal commission’s investigation with great interest, there is nothing at the moment that has made us believe that there will be a strong focus on our activity,” said Kathryn Bordonaro, vice-president of CAFBA.
A key issue the CAFBA believes would be appropriate for the royal commission to look into is the point of sale exemption enjoyed by the motor vehicle industry.
The point of sale exemption allows a car dealership to help consumers get financing from licensed credit providers. The amount borrowed can only be used to pay for goods and services provided by the dealership.
“That was a temporary exemption that was put in place when the National Consumer Credit Protection Act was first introduced. That temporary exemption is still in place eight, nine years later,” said Bordonaro.
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