Proposal branded 'crazy', ineffective
The Finance and Mortgage Advisers Association of New Zealand (FAMNZ) has strongly objected to a new proposal by the Commerce Commission, which mandates mortgage advisers to present three actual loan offers to every applicant.
This directive aims to intensify price competition and enhance choice in the home loan sector.
Proposal details spark concern
In its final report on the banking sector, the Commerce Commission urged mortgage advisers to promote competitive pricing by presenting clients with at least three valid lender offers and disclosing any banks they cannot represent, along with potential interest rates from these institutions, RNZ reported.
However, according to FAMNZ, this new requirement for advisers to submit multiple loan applications on behalf of their clients could inadvertently increase expenses, extend application processing times, and potentially damage consumer credit scores
Leigh Hodgetts (pictured above left), FAMNZ’s country manager, criticised the proposal as unnecessary overregulation.
“This is a classic case of a solution looking for a problem. Nothing is broken,” Hodgetts said, highlighting the inefficiencies this new rule could introduce.
International comparisons and industry impact
Peter White (pictured above right), FAMNZ’s managing director, labelled the recommendations “crazy,” noting the discrepancy between this proposal and practices in Australia, where mortgage advisers (known as brokers) are not required to submit multiple applications.
“Three applications means lenders will be spending time and resources processing applications they know they will likely never get, and other applications will be pushed aside,” White said.
He stressed that such measures would not only waste resources but could also jeopardise clients’ credit histories.
Call for government intervention
In response to the Commerce Commission’s approach, White has appealed to Andrew Bayly, the minister of commerce and consumer affairs, for immediate intervention and is seeking an urgent meeting to discuss these concerns.
Advocating for practical regulation
Both Hodgetts and White argued that while advisers can offer multiple lender options, typically only one application – aligned with the customer’s specific needs – should be processed at a time.
They stress that in certain cases, such as with self-employed individuals, there may be limited lending options available.
“Advisers already promote competition, consumers are increasingly choosing to use advisers, and complaints are almost non-existent,” Hodgetts said.
FAMNZ is eager to collaborate with the Commerce Commission to refine industry standards without imposing burdensome regulations that could negatively impact both consumers and the market.
“FAMNZ wants to work with ComCom to continually improve our industry and work in the best interests of Kiwi consumers, but unnecessary regulations and bureaucracy isn’t in anyone’s interest," Hodgetts said.
