Decision to drop the review welcomed by MFAA, FBAA
Industry leaders are applauding the federal government’s move to halt a review of broker commissions, saying it’s the result of the collective strength of the broking industry.
The Federal Assistant Treasurer and Minister for Housing, Michael Sukkar, confirmed on Friday that the 2022 review of Mortgage Broker Remuneration by the Council of Financial Regulators and the ACCC, won’t be going ahead.
It follows a proposed review of trail commissions pledged by the government in March 2019, in response to the Kenneth Hayne-led Royal Commission. The review was to be conducted by the Council of Financial Regulators and the ACCC.
In a written statement on Monday, MFAA chief executive officer Mike Felton (pictured above with Michael Sukkar), acknowledged industry reforms have continued for over five years. The decision to drop the review serves as appropriate recognition for the mortgage broking industry.
The Royal Commission established a principles-based ‘best interest’ obligation for mortgage brokers, alongside remuneration and governance reforms.
“This decision acknowledges the strong consumer outcomes mortgage brokers deliver, which is the direct result of the incredible work being done by 17,000 mortgage broker businesses as they continue to secure great outcomes for consumers,” Felton said.
In meetings with Treasury and the Federal Government, MFAA said it had continued to provide key data, as evidence the industry aligns itself with the best interests of consumers.
The MFAA said it had reminded Treasury of the effectiveness of reforms implemented to mortgage broker remuneration and conduct – and the success of the best interests duty (BID).
“Combined with industry self-regulation over many years, these reforms are delivering strong customer outcomes, and driving consumer trust and confidence in the industry – as evidenced by the key data on the industry, and the current record mortgage broker market share data,” Felton said.
“The alignment of the interests and expectations of brokers and consumers is also demonstrated through other strong industry data sets, including extremely low AFCA complaints, low arrears relative to the lenders’ proprietary networks and customer satisfaction rates that are unparalleled in financial services, or almost any other sector.”
Read more: Consumer thoughts on broker commissions
Mortgage brokers now write two out of every three new home loans in Australia. The industry plays an important role in giving consumers access to credit, whilst ensuring the home loan market remains competitive.
The MFAA endorsed the Assistant Treasurer’s announcement that a further review of mortgage broker remuneration was no longer required.
“Since 2019, the industry has grown from strength to strength as consumers continue to vote with their feet, resulting in the mortgage broking industry’s market share growing to a record 66.5% of all new residential home loans,” Felton said.
“Today, we are talking about an entirely different industry from the one that faced an ASIC Remuneration Review in 2016. Our industry has risen to the challenge and has grown as a force for good that supports critical competition.
“The work we have done alongside government has driven trust and confidence in mortgage broking by fully aligning interests and expectations of consumers and brokers, which is clearly reflected in the fact that two in three home loans are now originated through a mortgage broker.”
Peter White, managing director of the FBAA said on Monday he also welcomed the move. The FBAA would continue its discussions to ensure a review is not reintroduced by future Governments.
“While there has been no formal review process for some time, the industry has been scrutinised enough and has proven to the Government that the current system of remuneration is the best for consumers and the industry,” White said.
In a statement on Monday, AFG CEO David Bailey said on behalf of AFG and its members, the aggregator applauds the acknowledgement by Federal Government that the review is not required.
“This is positive news not only for AFG brokers but also the wider mortgage broking industry and all Australian consumers who rely on their service. The mortgage broking industry offers convenience, choice, and access to credit. By driving competition, mortgage brokers keep prices low for all borrowers,” Bailey said.
“Years prior to the Royal Commission, the industry undertook significant self-regulatory initiatives, working with regulators and government to roll out a series of proactive reforms.
In addition, since 2019 the government has introduced reforms and legislated changes, including BID, an unrivalled higher duty to align broker and customer interests and expectations; legislation to address reforms to conflicted remuneration and improvements to information sharing and reporting of misconduct, including a reference checking protocol, a breach reporting regime, and improved processes around notification and remediation of misconduct for consumers.
“These reforms - alongside brokers’ dedication to customers - have produced incredible data on positive customer outcomes, reinforcing that mortgage brokers support competition that is critical to the Australian economy,” Bailey said.
