The mortgage industry needs to demonstrate its ability to self-regulate and improve transparency, the Mortgage & Finance Association of Australia has said.
Responding to the Australian Securities and Investments Commission (ASIC) Review of Broker Remuneration Report, MFAA CEO Mike Felton said addressing the recommendations made in the report would be the industry’s sole chance to prove its capacity to self-regulate.
“The time to prosecute these issues with ASIC has passed, and avoiding them is simply not an option,” Mr Felton said.
“If we are to enhance consumer outcomes throughout the mortgage and finance value chain with minimum disruption for our members, we must embrace change voluntarily.”
Arguing that “maintenance of the status quo is not an option”, the MFAA made six proposed solutions to the ASIC recommendations:
1. Improving the standard commission model to guard against ‘product strategy’ conflict and ‘lender choice’ conflict
2. Moving away from bonus commissions and bonus payments
3. Moving away from soft dollar benefits
4. Clearer disclosure of ownership structures
5. A new public reporting regime
6. Improved governance and oversight
The MFAA recommended that lenders pay upfront commissions on the drawn amount net of offset, with a top-up, adding that brokers should improve transparency when offset accounts are recommended or used.
Mr Felton argued that enhanced regulation would improve consumer outcomes and boost the professionalism of the industry and added that defining ‘good consumer outcomes’ and identifying the methods of measurement would be the first step.
“Lenders and aggregators will need to be responsible for the monitoring of brokers, using a risk-based approach that draws on both loan and performance data provided by lenders. This will require an agreed performance scorecard which aggregators and lenders can use to assess broker performance against the agreed ‘good consumer outcomes’,” he said.
At the next meeting of the Combined Industry Forum, which includes the Australian Bankers' Association, the MFAA, the Finance Brokers Association of Australia and the Customer Owner Banking Association of Australia, a timeline for implementing the solutions will be established.
[Related: Broking boss hits out at commission claims]
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