Industry deplores calls for ASIC investigation

Choice, together with the Consumer Action Law Centre and Financial Rights Legal Centre, has called on the federal government to increase funding to ASIC so that it can begin investigations into the third-party channel.

The call follows a mystery shop conducted by Choice of only 15 brokers from three of Australia’s largest broking groups, which found undisclosed commissions and bad information being provided, according to the advocacy group.

“From pressure sales tactics to failure to openly disclose commissions, the Choice investigation found brokers from Aussie Home Loans, Mortgage Choice and AFG often failed to adhere to best-practice benchmarks and give appropriate advice,” Choice chief executive Alan Kirkland said.

“With the federal Budget next week, we are calling on the government to increase funding to ASIC to ensure appropriate mortgage broker conduct is a priority and the regulator has the resources to investigate the industry.”

However, industry heavyweights have hit back at the ‘mystery shop’, claiming it does not reflect the entire industry.

Mortgage Choice chief executive John Flavell said the report’s suggestion that the group is driven by conflicts of interest and sales incentives could not be further from the truth.

“At Mortgage Choice, our brokers are paid the same rate of commission regardless of which home loan product their customer chooses,” he told The Adviser.

“So to suggest our brokers are financially incentivised to recommend one product over another is wrong and misleading.”

Mr Flavell also criticised Choice for not providing Mortgage Choice with the names of the brokers who were mystery-shopped.

“The fact that Choice refused to be transparent with us makes us seriously question the validity and credibility of their investigation,” he said.

AFG’s general manager of sales and operations, Mark Hewitt, said Choice’s report is based on a very shallow sample size and does not reflect AFG’s own research.

“We do our own customer surveys and file audits every month and we consistently receive great feedback around our brokers and the financial solutions they provide for customers. We also have reports from our funding partners that are reflective of this,” he told The Adviser.

“We really think that Choice are conflicted here – they are part of the organisation behind One Big Switch, which was a resounding failure, so I suspect there’s an element of sour grapes involved here.”

Aussie Home Loans chief executive James Symond said he welcomes scrutiny of the industry, but believes it is already scrutinised by a range of federal and state regulators.

“We have the systems and processes in place to monitor our brokers’ activity and adherence to compliance and we have no concerns about the findings or outcomes of any investigation into our brokers, as suggested by Choice,” he told The Adviser.

Mr Symond also noted that one of the Aussie brokers who was mystery-shopped advised a client not to apply for a loan.

"Mortgage broking is a fast-growing and dynamic sector in the home loan market because it helps consumers with one of the biggest financial commitments in their lives," he said.

[Related: Consumer advocate slams 40-year mortgages]