The Reserve Bank of Australia has revealed that it believes all brokers should be required to act in a consumer’s “best interests”.
In its response to the Productivity Commission’s draft report into competition in the Australian financial system, the RBA came out in support of several of the commission’s draft recommendations.
Notably, the central bank revealed that it was in support of the draft recommendation that the Australian Securities and Investments Commission impose on lender-owned mortgage aggregators (and the brokers that operate under them) a “clear legal duty” to act in the consumer’s best interests.
Further, the RBA called for such a duty to be extended to all brokers, not just those operating under lender-owned aggregators.
The bank’s submission reads: “The bank supports the draft recommendation to require lender-owned aggregators and the brokers who operate through them to act in consumers’ best interests… We would support extending this to all brokers.
“While there may be some benefit in enhancing mortgage broker disclosure requirements to consumers to improve transparency, it is important to recognise that some consumers may nonetheless still not fully understand the information provided (given its complexity and the backdrop of consumers not taking out a mortgage frequently).
“Steps to address the underlying conflicts of interest and misaligned incentives are therefore crucial to improving consumer outcomes.”
Further to this, the RBA pulled on several findings from ASIC’s remuneration review, highlighting a number of other factors that it believes “inhibit the effectiveness of competition through mortgage brokers”.
The RBA said that it is therefore in support of “enhancing” the transparency of mortgage interest rates paid by borrowers.
It suggested that possible ways of doing this could include “asking the banks to publish these rates directly” or “conducting a survey of the largest mortgage brokers to obtain representative rates”.
The RBA made several other statements in its submission, including:
[Related: ANZ sees ‘merit’ in best interest duty]
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