MFAA urges Treasury to protect fairness in CSLR levy framework

In its submission to Treasury’s consultation on the sub-sector levy cap, the MFAA has strongly objected to mortgage and finance brokers being unfairly burdened by special levies under the Compensation Scheme of Last Resort (CSLR).

Assistant Treasurer and Minister for Financial Services, the Hon. Dr Daniel Mulino, has asked Treasury to consult on funding options for the $47.3 million in unfunded claims arising out of the financial advice sector. These options include:

•           Spreading compensation over time,

•           A special levy raised just for the financial advice sub-sector, or

•           A special levy for several sub-sectors or more.

“A number of these proposals would result in other industries subsidising unfunded claims from the advice sector,” said MFAA CEO Anja Pannek. “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.”

Ms Pannek said the 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. Extending special levies to brokers would be unfair, disproportionate, and inconsistent with the purpose of the CSLR.”

Pannek stressed that brokers, which are predominantly small businesses, already contribute to the CSLR through the annual levy framework, as well as ASIC levies, AFCA fees, and hold professional indemnity insurance.

“To ask these small businesses to subsidise unrelated parts of the financial sector through a special levy is inequitable,” Ms Pannek 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.”

The MFAA’s submission highlights 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, while 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 – in fact, 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).

The MFAA also urged Treasury to ensure that the current CSLR Post-Implementation Review process reinforces key principles of fairness and proportionality, including:

•           Special levies must be targeted, evidence-based and proportionate, avoiding cross-subsidisation between unrelated sub-sectors.

•           Ministerial discretion should not create an ongoing precedent for shifting costs onto sectors with no connection to misconduct or unpaid determinations.

•           The CSLR must continue to operate as a true scheme of last resort – a safety net, not a mechanism for broad cost transfer.

“Mortgage and finance brokers deliver high-quality outcomes for consumers and play an essential role in driving competition and choice in the financial system. The CSLR was never intended to impose costs on sectors that are not the source of consumer harm. We urge the Minister to ensure any levy arrangements remain consistent with the scheme’s original purpose,” Pannek said.

You can read the MFAA’s submission to the current consultation on options for exceeding the sub-sector levy cap here.