By: Jessica Darnbrough
It appears as though the debate surrounding minimum volume requirements has been settled.
Last month, the MFAA consulted ASIC for its clarification as to whether sales hurdles set by some lenders could conflict with the industry’s ‘responsible lending’ credit laws.
Following the consultation, the MFAA announced on its website that: "If the borrower is not disadvantaged and the loan is (a) appropriate and (b) the loan is not unsuitable, then no conflict arises".
CBA’s executive general manager for third party banking Kathy Cummings says the MFAA’s clarification confirmed what the bank already knew.
“We were confident there was no conflict. Our minimum requirements are there to help us to determine a broker’s competency, particularly in light of the new regulation,” Ms Cummings told The Adviser.
“Our requirements are aimed at improving customer satisfaction. A broker who is competent in our products and processes will ensure a positive experience for the customer. We believe this is in the best interest of the broker and the consumer.”
Ms Cummings said the bank, which requires brokers to submit a minimum of four mortgage applications and settle a minimum of three loans within a six month period, had no plans to change its volume requirements.
“CBA’s requirement for brokers to lodge a minimum number of loans in a set period of time is a competency standard and a good thing. I am proud of the leadership the bank had taken on this issue,” she said.
Mortgage Choice’s chief executive officer Michael Russell said he has no issue with segmentation by volume (or quality) providing brokers are always afforded the opportunity to be re-accredited should they not achieve the minimum volumes during a qualifying period.
“Naturally, should a lender ever remove the opportunity for brokers to be immediately re-accredited, then my position would change,” Mr Russell told The Adviser.
“In the main, each of the four lenders genuinely believe that setting minimum volumes ensures that brokers are appropriately familiar with their products, processes and credit criteria to be able to engage prospective customers in a way they would want their products presented.
“This is perfectly reasonable and difficult to dispute.
“If a broker hasn’t lodged a loan with a particular lender for 12 months or so, then they would more than likely need to undertake a refresher in that lender’s products, processes and credit criteria.
“As for the re-accreditation fee, while we’d clearly prefer there to be no fee, we do accept that lenders incur a cost in the re-accreditation process and providing any fee charged is always on a recoupment fee basis only, we again have no issue.”
FBAA president Peter White however, has a slighty different view when it comes to sales hurdles.
While Mr White said it was unlikely minimum volume requirements would create a conflict of interest, he did argue that the sales hurdles imposed by some lenders encourage anti-competitive behavior.
“While I am happy to admit that minimum volume requirements do not create a conflict of interest, I still believe they are an unnecessary evil,” Mr White told The Adviser.
“Moreover, I believe sales hurdles contradict the role of the aggregator. Aggregation was first designed so individual hurdles would not apply. Now with the introduction of minimum volume requirements, the fundamental reason for aggregators is being pulled apart.”
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