The Royal Commission final report has been released to the public and outlines recommendations from Commissioner Hayne.
The most widely anticipated recommendation for mortgage brokers was to abolish the current remuneration structure.
It is now confirmed that Hayne does recommend a change to broker commissions, encouraging a flat fee for service to be paid by the borrower.
The report says, "The borrower, not the lender, should pay the mortgage broker a fee for acting in connection with home lending. Changes in brokers’ remuneration should be made over a period of two or three years, by first prohibiting lenders from paying trail commission to mortgage brokers in respect of new loans, then prohibiting lenders from paying other commissions to mortgage brokers."
Update: In his speech, treasurer Josh Frydenberg has said the government will work towards removing trail commissions and volume based bonuses by 1 July 2020. He said a review would take place to assess the impact of removing upfront commissions, given previous reports raised concerns about the move.
The report also said that mortgage brokers should be under the same rules as financial advisers: "After a sufficient period of transition, mortgage brokers should be subject to and regulated by the law that applies to entities providing financial product advice to retail clients."
Recommendation 1.6 adds, "Misconduct by mortgage brokers ACL holders should: • be bound by information-sharing and reporting obligations in respect of mortgage brokers similar to those referred to in recommendations 2.7 and 2.8 for financial advisers; and • take the same steps in response to detecting misconduct of a mortgage broker as those referred to in Recommendation 2.9 for financial advisers."
There are also a number of referrals of banking institutions to ASIC as a result of findings from the Royal Commission.
The report, which is more than 1100 pages long, was delivered to the government on Friday, but was not released publicly until this afternoon.
The final report follows more than 10,000 submissions from the Australian public relating to misconduct in the banking sector, as well as 69 days of public hearings.
The Labor party has already said it plans to adopt Hayne's recommendations in full.
The Australian Banking Association (ABA) is expected to hold a press conference shortly.
More to follow..
What else we know:
- There are also a number of referrals of banking institutions to ASIC as a result of findings from the Royal Commission
- Hayne has recommended a new watchdog to look over ASIC and APRA