A big four bank has committed to cease paying referral payments to introducers in a bid to be “simpler and more transparent” following the banking royal commission.
National Australia Bank has announced that it will end its introducer payments program from 1 October 2019 and will no longer make referral payments to introducers from this date.
The move does not impact mortgage broker payments – but instead introducers, such as those highlighted during the royal commission hearings.
Anthony Waldron, NAB executive general manager, broker partnerships, told The Adviser: “Today’s announcement only impacts our introducer payment program.
“We are proud to be the bank behind brokers and remain committed to supporting brokers and their customers.”
The decision follows on from NAB overhauling its introducer program last year, when it reduced its introducer network from 8,000 to just over 1,000.
NAB last year also ceased accepting referrals from introducers who operate outside the professional services industries.
Speaking of the latest decision, new NAB CEO Philip Chronican said it was important to keep improving, taking action and changing to be a better bank.
“Through the royal commission, we heard clearly that our actions need to meet the expectations of our customers and the community. We need to be simpler and more transparent to earn trust. We have to put customers first to be a better bank,” Mr Chronican said.
“We want customers to have the confidence to come to NAB because of the products and services we provide – not because a third party received a payment to recommend us.”
Mr Chronican recognised the significance of these changes for NAB, its bankers and the industry, but said he was certain it was the right thing to do to deliver better outcomes for customers.
“Like other businesses, we will still welcome referrals and will continue to build strong relationships with business and community partners. However, there will be no ‘introducer’ payments made,” he said.
“I understand the significance of these changes for our people and our industry, yet I am certain it’s the right thing to do. NAB has a significant role to play in leading the change our customers and the community want to see.”
NAB added that sporting clubs benefitting from the introducer payment program will receive “equivalent sponsorship” from NAB as a result of the change.
Introducers in focus
The role of introducers in mortgage lending was referred to repeatedly over the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, as it looked at intermediated relationships and its impact on lending.
According to ASIC’s 2017 Review of Mortgage Broker Remuneration (Report 516), an introducer or referrer is an individual or business that provides leads to lenders or brokers.
Indeed, ASIC has previously stated that the number of referrals being made to lenders, either by the referrer directly or through a referrer aggregator had increased significantly. The remuneration review outlined that the total number of home loans sold after a referral increased from 8,124 in 2012 to 26,106 in 2015, representing an increase in value from $3.3 billion to $14.6 billion.
ASIC added that some of the most common referrers are real estate agents, migration agents, financial planners and other professional services referrers. However, referrers can also include many other types of individuals and businesses, including property developers and non-profit organisations. However, the royal commission hearings also heard cases of introducers being gym owners.
Under the law, introducers must comply with certain requirements, including that they do no more than refer the potential borrower to the lender and facilitate the borrower making contact with the lender.
In his final report, commissioner Kenneth Hayne noted: “Introducers have an obligation to disclose to a potential borrower any benefits, including commissions, that the introducer may receive for the referral. The effect of the current regime is that introducers are not permitted to be involved in the credit application or assessment process.
“Introducers must only act within the confines of their prescribed role. Entities must have systems in place to ensure that introducers do not exceed this role. And entities should not regard the role of the introducer as modifying their own responsible lending obligations.
“If introducers and entities behave in this way, introducer programs are not incompatible with responsible lending obligations.”
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.
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