The co-founder of the newly licensed neo-bank has called for increased disclosure from mortgage brokers regarding conflicts of interest.
Participating in a panel discussion at the ASIC Annual Forum on Tuesday (20 March), Xinja co-founder and director of strategy and innovation Van Le claimed that brokers should be required to disclose certain conflicts when advising borrowers.
“[There] isn’t a requirement to disclose conflicts of interest when brokers or advisers are providing recommendations or advice to a customer,” the director said.
“On a company board, if there’s a decision to be made, you excuse yourself if you know that there’s a conflict of interest, and you declare it. Customers don’t have, necessarily, that same right today when they’re working with brokers or advisers.”
Ms Le made particular reference to brokers working under lender-owned aggregators, claiming that brokers should inform borrowers when writing loans issued by the parent lender.
The director said: “This is not to say that the advice they get is not the best advice, but consumers should be informed, for example, if this particular broker is recommending a mortgage that’s being issued by the bank that owns that brokerage, or if they are recommending a mortgage that happens to be paying a commission that’s one of the highest in the industry.
“It’s not necessarily enough to declare ‘this is the commission I get paid for recommending this product’.
“It’s the context around that decision that enables consumers to make that choice, and the whole principle around choice is having enough information to make it.”
ASIC flagged similar concerns with conflicts of interest before the Productivity Commission last month.
The online lender has expressed its commitment to the broker channel, stating that brokers are “essential” to its digital home loan approval process.
“We are on record as believing that brokers form an essential part of our business model, and indeed we have included a number of brokers in our product prototyping sessions,” Xinja CEO Eric Wilson said.
“On a more general level, we believe that expert advice provided by the broker community is essential for large, important decisions such as home loans.”
The crowdfunded online lender recently received an Australian credit license (ACL) from the Australian Securities and Investments Commission (ASIC), and it has also applied for an Australian Financial Services Licence (AFSL) and a banking licence to become an authorised deposit-taking institution (ADI) through the Australian Prudential Regulation Authority (APRA).
[Related: ASIC flags conflicts of interest for brokers]