The MFAA was disappointed by the ill-informed comments from consumer advocacy groups that were reported in the media today in regard to the ASIC Review of Mortgage Broker Remuneration. The MFAA believes the changes they proposed to broker commission models would be detrimental to consumers’ interests.
The MFAA represents 12,900 brokers, each of whom is responsible only to consumers – their customers – and rely entirely on customer relationships and referral to grow their businesses.
MFAA CEO Mike Felton said the proposals posed by the joint submission of consumer advocates would significantly harm the interests of consumers they claim to represent. The proposals raised by consumer advocates do not reflect the concerns raised by ASIC.
"ASIC understands that brokers drive competition and provide a critical service to consumers that combines choice, expertise and convenience, to help them make informed choices and get the most appropriate deal. This was supported by comments made by ASIC Chairman Greg Medcraft after the Report's release, in which he said that brokers deliver great consumer outcomes," Mr Felton said.
"The MFAA has been actively working with ASIC, Treasury and a number of other key stakeholders for more than 12 months on different ways to improve the commission structure to enhance consumer outcomes.
"A fee-for-service model may suit lenders, but it would drive the majority of brokers out of the industry. This removal of access to brokers for Australians would severely reduce competition in the industry, which is something we are trying to avoid for consumers.
"Consumers have voted with their feet over the past 20 years, and mortgage brokers now write more than 53 percent of all mortgages in Australia. The industry grew by four percent in 2016, and 92 percent of consumers reported they were 'satisfied' or 'very satisfied' with their broker's performance, according to a 2015 Ernst & Young study.
"I do not see how removing brokers from the industry, and consolidating power back in the hands of banks, serves the needs of consumers.
"This is also about access to finance for Australians. If you live in a regional or rural area, you may not have access to a bank branch – or you may have access to one bank branch. Brokers provide regional Australians the same access to finance as people who live in inner Sydney or Melbourne and it is critical that we should avoid doing anything to negatively impact that.
"When you are obtaining a mortgage, there is a lot more at stake than just the interest rate. Brokers assess the needs of their customers in detail, both now and into the future and recommend products and lenders that suit these needs," Mr Felton said.
Consumer groups have also called for the removal of the link between loan size and commission. The MFAA reiterates that the ASIC Report does not recommend this, nor a flat fee-for-service model, nor removal of trail commission.
"A single, lender-funded, fee-for-service would lead to a standardisation of all fees, which we believe ASIC itself does not support and we believe would also be considered anti-competitive by the ACCC," Mr Felton said.
"All our commissions are fully disclosed, and the MFAA works very hard to ensure that brokers are transparent about how and why they are paid by lenders. We will continue to work with ASIC and Treasury and the Combined Industry Forum made up of a broad range of key industry stakeholders to seek the best possible outcomes for consumers," Mr Felton added.