Consumer group CHOICE says the proposed CIF mortgage broker reforms are positive, but do not address their key concerns of ensuring brokers act in the best interests of their customers (currently they are not obliged too), and potential conflicts about poorly disclosed trail commissions.
Consumer advocate CHOICE and other consumer groups have welcomed changes to broker commissions proposed by the Combined Industry Forum.
“This announcement from the mortgage brokers, aggregators and lenders is a positive first step towards ensuring that mortgage brokers act in customer interests,” said CHOICE’s director of campaigns and communications, Erin Turner.
CHOICE, which was harshly critical of brokers in their submission to ASIC earlier this year, said CIF’s proposals “shows that all parties in the home lending industry have taken ASIC’s report into mortgage broker remuneration seriously.”
It adds that the changes could increase transparency by informing consumers about the number of lenders brokers used.
CHOICE became part of the CIF after complaining to the Treasury in July that “reform must be focused on what’s best for consumers, not what works for brokers, aggregators or lenders.”
Broker heads hopeful
Both following ASIC’s review, an ongoing Productivity Commission review and in an earlier ‘shadow-shopping’ report, CHOICE have been critical of brokers in the past two years.
However, broking industry associations are hopeful that CHOICE’s involvement in and endorsement of the Combined Industry Forum’s recommendations could lead to a more cooperative relationship.
“I would hope so,” FBAA executive director Peter White told MPA. “it has turned out to be a good result, they have been involved. It’s no ‘roll over, we’ll do this because I say so’; there’s been debate and meaningful discussion about things.”
MFAA CEO Mike Felton said he looked forward to working with consumer advocates going forward: “we the MFAA and the Combined Industry Forum recognise that the consumer is a key stakeholder and that it was critical that the consumer be represented throughout this process. I think that gives credibility to the reforms that have produced.”
Still concerned about trail commissions
Consumer advocates did not entirely welcome the recommendations of the Combined Industry Forum, however.
CHOICE noted that “we are disappointed that brokers aren’t required to act in the best interests of consumers and that there are few changes to overall commission structures. In particular, there is little clarity about the consumer benefit of trail commissions.”
“Consumer groups will continue to discuss these reforms with industry and look forward to their implementation.”
CHOICE has complained about trail commissions to an ongoing review by the Productivity Commission into competition in the financial system. The review, which reports in July 2018, could lead to changes by the Government, depending on its recommendations.