First published 22 February 2019

Dear Member,

This is a brief message to update you following recent developments in regard to Opposition policy announcements in response to the Royal Commission’s recommendations on broker remuneration.

Over three tumultuous weeks, we have launched and driven all phases of our multi-tiered “Don’t kill competition” campaign to defend the broker proposition and advocate with the Government and the Opposition, to help all Australians understand what a world without brokers would look like.

Supported by 15 aggregators and 14 additional lenders, insurers and other suppliers to the mortgage broking industry, this campaign has focused heavily on the severe impacts on competition that would result from a fee-for-service remuneration model such as that recommended by the Hayne Royal Commission.

We have spent many hours in Canberra, engaging with Government, Opposition and independent representatives, to ensure that they understand the value you provide for all Australians – not just your customers – and the unintended consequences of a fee-for-service model.

Following the Commission’s Final Report, we ran a series of full-page ads in the Australian Financial Review and The Australian, before launching a national, multi-media advertising campaign and grassroots activation campaign that has seen brokers and consumers send in excess of 30,000 emails to their local MPs in support of the channel.

Alongside this effort, beginning in mid-January and building into the week of the Final Report, I have held countless conversations and interviews with journalists across print and broadcast outlets, to explain to them why these recommendations would be disastrous for competition and consumer outcomes.

Following the Report’s publication, I spoke to ABC, Channel 9, SKY News, Sky ‘Your Money’, The Project, 2GB, 3AW, 6PR, and more to elevate the public profile of what is at risk and what these proposed changes would mean for the mortgage broking channel and the customers you serve. We will continue to engage the media daily to argue strongly on behalf of the industry.

Our campaign has been well-supported and has captured the attention of all key stakeholders. We have been gaining the attention our case deserves from media, and we have been given a fair hearing from all sides of politics in Canberra.

I believe we are in a much stronger position now than we were two weeks ago as an industry, and I expect that improvement to continue.

In regard to the most recent development, the MFAA welcomes the announcement made today by the Federal Opposition that under a Labor Government, upfront commissions will be retained and increased to a level which ensures mortgage broker viability, while protecting competition, choice and access to credit.

The announcement made was in response to both the Hayne Royal Commission’s recommendations and the Government’s response to the Commission’s Report.

We do not believe that the case for the removal of trail commissions has been made and will continue to argue for trail to be retained, however given that the Productivity Commission, the Royal Commission, the Government and now the Opposition have called for trail to be removed, our first priority has to be on protecting the viability of the mortgage broking industry as a whole. In this regard, increasing upfront commissions to 1.1 per cent to the broker would be an effective way of protecting broker business viability in circumstances where trail is removed.

It is our understanding that the payment by lenders to brokers of 1.1 per cent of loan value does not include the component that is needed to sustain aggregation or broker group services. This means that lender payments will need to be higher to ensure that these necessary services are covered, whilst maintaining the 1.1 percent commission payment to brokers.

Retention of commissions that reflect the value that mortgage brokers generate for their clients will help protect good consumer outcomes, while sparing Australian borrowers a new multi-thousand-dollar fee every time they wish to apply for a loan or try to refinance their mortgage.

We are pleased to see that both the Government and Opposition have now acknowledged that a consumer-paid fee-for-service would impact competition making it harder and more expensive to get a home loan which is a significant shift in position from just two weeks ago.

The priority of all policy makers must be to protect competition, choice and excellent customer outcomes by ensuring the viability of 17,000 small businesses in the mortgage broking industry.

There is a long way to go in this effort, and there are still a lot of details to be discussed, and we look forward to having further dialogue with the Shadow Treasurer, the Shadow Minister for Financial Services, as well as Government and regulators in the weeks and months ahead.

We look forward to updating you in the near future, however in the interim please ensure that you continue to make your voice heard by supporting the campaign and strongly encouraging your colleagues and customers to do the same.


Kind regards

Mike Felton 

Chief Executive Officer
Mortgage & Finance Association of Australia (MFAA)