CBA to introduce major accreditation changes next year

CBA to introduce major accreditation changes next year

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Commonwealth Bank has announced that, from next year, it will no longer accept accreditations from new mortgage brokers with less than two years of experience or from those that only hold a Cert IV in Finance & Mortgage Broking.

Speaking to The Adviser on Thursday (14 December), CBA’s general manager for third party banking, Sam Boer, and Matthew Dawson, general manager for distribution strategy & execution, explained that the bank would be bringing new benchmarks for mortgage brokers “designed to lift standards and ensure the bank is working with high-quality brokers who are meeting customers’ home lending needs”.

As part of the reforms, from “the first quarter of 2018”, new mortgage brokers will be required to meet new minimum education standards to be able to write Commonwealth Bank loans and demonstrate a commitment to professional development and on-the-job experience. 

For CBA accreditation, all new brokers will soon be required to meet the following standards: 

- Hold at least a Diploma of Finance and Mortgage Broking Management 

- Have at least two years’ experience writing regulated residential loans

- Be a current member of either the Mortgage & Finance Association of Australia (MFAA) or the Finance Brokers Association of Australia (FBAA)

- Be a Direct Credit Representative or employee of an approved Aggregator/Head Group or Australian Credit License (ACL) holder

Cert IV has ‘served its purpose’

Speaking of the changes, Mr Boer told The Adviser: “I actually sat down and reviewed a Cert IV for a friend of mine and looked at the process, and I think that while the Cert IV has served its purpose, with the new standards and expectations that are on us (which have been highlighted through the [ASIC and Sedgwick] reviews and through the Combined Industry Forum reform package), it’s time that we need to look at and set new benchmarks.

“So, that is what we feel is appropriate for the brokers that we want to partner with, to ensure that we are delivering those great customer outcomes.”

Mr Dawson added: “We want to ensure that customers feel confident that mortgage brokers have achieved that minimum standard of education and they can be confident in the advice or the guidance that they are seeing — because home loans are complex products and we want to make sure that customers get good outcomes.”

He continued: “Brokers have done a fantastic job of supporting the industry and supporting great customer outcomes and we want to make sure that that continues for new entrants to the market.”

Two-year requirement

When asked why the decision has been made to only accredit new brokers with more than two years of residential loan writing experience, Mr Dawson said that the decision came down to the quality of loans written.

He told The Adviser: “The data that we have seen on the back book shows that there is a clear correlation that those that are more experienced (and those that are writing more loans) provide better customer outcomes, be they either the ongoing performance of the loan, the ongoing performance of the customer, and adherence to responsible lending as well.” 

Mr Boer highlighted that there is a “huge amount of turnover” with new brokers, which he said was a “clear indication that these people need support”.

The general manager for third party banking continued: “They need more training, they need more investment to ensure that they are successful and, of course, with the increased complexity now and expectations on meeting responsible lending, we need to make sure that our brokers are meeting those standards and doing it right.

“So, it is very difficult for somebody without any financial experience, we believe, to be able to meet those standards. And therefore, we need to support, embed and ensure that they have that minimum level of capability.”

When asked whether new brokers coming from financial backgrounds (such as ex-bankers) would also be subject to the two-year requirement, Mr Boer said: “This is really about experience in sitting in front of customers and actually discussing mortgage products. But it’s not the only requirement that we have focused on. There is the education standard as well, which is also a very important part of the requirement.” 

Aussie brokers to be held to same standards

Mr Boer emphasised that the new accreditation process holds “the same rules for everyone”, and that CBA-owned brokerage Aussie would also be subject to the same accreditation changes. 

He told The Adviser: “It’s the same rules for everyone. We are investing with all our strategic business partners to ensure they meet the new standards.” 

“We believe that [the changes] are in the best interest of consumers and the industry alike.”

Accreditation changes aim to support Combined Industry Forum reform package

The accreditation changes for new brokers come off the back of the Combined Industry Forum’'s reform package, which was released this week (and to which Commonwealth Bank was a contributor).

According to Dan Huggins, executive general manager of home buying, the new changes form part of CBA’s new mortgage broking model and “long-term commitment” to the industry.

“As a leading home lender, we recognise mortgage brokers as a key channel for customers who are looking to purchase a home, and we have been working with the industry forum to find the right balance to ensure the best customer outcomes,” Mr Huggins said.

“Our new standards follow extensive consultation with the brokers, and are another example of our commitment to delivering the recommendations of the Sedgwick report and ASIC review well before the 2020 deadline.”

While Mr Boer added: “We’re committed to the process around the industry reform package. It is significant amount of change with quite a bit of challenge and a lot of investment required by industry. At CBA, we are making a huge investment to support the industry and ensure we are delivering on those standards.”

All new accreditations on hold

CBA said that it would work closely with brokers who meet these requirements during the accreditation process, including conducting interviews and providing support with professional development plans.

The bank expects to launch the new process in the first quarter of 2018, with all new accreditations on hold until then to ensure that the new process is implemented effectively. 

In addition to the updated accreditation standards, CBA is also reviewing non-monetary benefits provided to brokers to ensure that they support good customer outcomes; improving the value proposition for accredited brokers; and rolling out the industry’s proposed changes to commissions and KPIs. These changes will be in line with the principles announced in the CIF package, and further details will be released in the new year.

[Related: CBA admits to breaches of counter-terrorism and anti-money laundering laws]

CBA to introduce major accreditation changes next year
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