By: Jessica Darnbrough
The MFAA has told the Australian Securities and Investments Commission (ASIC) that the sales hurdles set by some of the major banks will conflict with the industry’s ‘responsible lending’ credit laws when they come into play from 1 July.
The MFAA have written to the federal Treasury to argue that the volume hurdles put in place by CBA and Westpac contravene the key proposition of mortgage broking – choice.
CBA dictates that brokers must submit a minimum of four mortgage applications and settle a minimum of three loans within a six month period to remain accredited, while Westpac requires one loan to be settled each six months.
The new National Consumer Credit Protection Act says a licensee must “have in place adequate arrangements to ensure that clients of the licensee are not disadvantaged by any conflict of interest that may arise wholly or partly in relation to credit activities engaged in by the licensee or its representatives”.
MFAA chief executive officer Phil Naylor said that the volume hurdles would, in fact, disadvantage clients and represent a conflict of interest for brokers.
“We told them [ASIC] our members feel as though there is a conflict of interest in how they provide advice and asked for guidance on how to manage that,” Mr Naylor told The Australian Financial Review.
Peter White, president of the FBAA, agreed that sales hurdles represent a conflict of interest and said he too had written to Treasury.
“This is an ethical issue for banks. When you have hurdles, it’s hard to put your hand on your heart and say you’re complying with the legislation. We’ve written to treasury.”
But minimum volume hurdles aside, Mr White said he had no other concerns about the forthcoming regulation.
“When we step up the level of professionalism by licensing the industry, we will see a broker’s offering a whole new value proposition and I think the banks will have a hard time competing against the broker proposition under the new licensing laws,” Mr White told The Adviser.
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