The industry will need to self-regulate in order to standardise the calculation of net of offset payments, with Treasury reluctant to enact such reforms via the legislative process.
In a webinar hosted to discuss the aggregator’s submission to Treasury, Connective director Mark Haron has revealed that the federal government is not prepared to standardise the calculation of net of offset payments as part of the broking reforms proposed in its National Consumer Credit Protection Amendment (Mortgage Brokers) Bill 2019.
In the weeks following the publication of the government’s bill, industry leaders, including Mr Haron, noted the impact of contrasting remuneration policies adopted by lenders off the back of the Combined Industry Forum’s move to limit the upfront commission paid to brokers to the amount drawn down by borrowers (net of offset).
Mr Haron previously said that some lenders had opted to withhold the payment of commission for additional funds arranged by a broker, which are utilised by a borrower after a pre-determined period post-settlement.
The Connective director also noted that the disparity in the application of the CIF reforms had increased risks of “lender choice conflicts”, which could hinder compliance with the newly proposed best interests duty.
Mr Haron’s concerns were echoed by Loan Market executive chairman Sam White, who called for an arrangement that “mirrored” existing clawback provisions, which, under the federal government’s bill, would limit the clawback period to two years and prevent brokers from passing on such costs to their clients.
“If it is good enough for banks to claw back the money over two years, it should also be good enough to increase the upfronts over that same time period,” he said.
Both Mr Haron and Mr White had said they would lobby for amendments to the bill.
However, Mr Haron told his members that the industry will need to self-regulate, after revealing that Treasury has taken such reforms off the table.
“I know net of offset utilisation payments have been extremely disruptive [for a lot of brokers] because most banks have different ways of doing it,” he said.
“We’ve voiced, as an industry, our frustration with that.
“We did ask if they could look at the legislation to [standardise] that, but they have no interest in doing that, so we have to forge ahead as an industry to try and get to a more consistent place across all the lenders in that respect.”
However, Mr Haron said that he is hopeful that the industry will reach a solution, noting that there’s a general consensus regarding the time frame for post-settlement drawdowns.
“Regardless, 90 days has been seen by everyone as a ridiculous time frame for funds to be utilised,” he said.
“What we’ve generally agreed on from an industry perspective is that at a minimum, it should be 365 days.”
[Related: Trail ‘at risk’ in best interests duty bill]
Charbel Kadib is the news editor on The Adviser and Mortgage Business.
Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.
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