Powered by MOMENTUM MEDIA
the adviser logo
Broker

FBAA refutes RC concern over broker commissions

by Charbel Kadib5 minute read
Woman holding a pen and documents

The industry association has responded to a suggestion made by Commissioner Hayne that the payment of value-based commissions to brokers “might” be breaching NCCP obligations.

Executive director of the Finance Brokers Association of Australia (FBAA) Peter White has rejected claims made by Commissioner Kenneth Hayne in the interim report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

Commissioner Hayne alleged that lenders paying value-based upfront and trail commissions could be in breach of section 47(1)(b) of the National Consumer Credit Protection Act (NCCP).

Section 47(1)(b) states that licensees must “have in place adequate arrangements to ensure that clients are not disadvantaged by any conflict of interest that may arise wholly or partly in relation to credit activities engaged in by the licensee or its representatives”.

Advertisement
Advertisement

However, Mr White said that the interim report did not find any systemic evidence to suggest that conflict of interest in the payment of commissions to brokers directly disadvantages clients.

The FBAA director added that he believes licensees already have “adequate arrangements” in place to prevent conflicts of interest.

Mr White added: “The commissioner pointed out that a breach of the NCCP is not an offence or open to civil penalty.

“I would argue that the cancellation or suspension of a broker’s licence by ASIC is a substantial penalty in itself.”

Mr White also sought to dismiss concerns raised by the commissioner over the number of loans submitted via the broker channel with higher loan-to-value ratios (LVRs).

“It’s the broker’s duty to put the client’s interest first and to meet, if not exceed, their expectations,” the FBAA executive director said.

“In meeting client needs, brokers are often asked to source higher leverage loans to appropriately support their needs, taking into account a client’s debt levels and loan-to-valuation ratios.

“It’s a broker’s ability to source a specific loan product to suit their client’s specific needs that gives us a market advantage.”

Mr White concluded by stating that brokers were at the forefront of efforts to improve service delivery and remuneration structures.

The FBAA echoed comments made by the Mortgage & Finance Association of Australia (MFAA), which told its members: “The self-regulatory approach the industry is taking through the [Combined Industry Forum] remains the best way to improve customer outcomes, standards of conduct and culture, while preserving and promoting a vibrant and competitive mortgage broking industry that encourages consumer choice.” 

Submissions in response to the commission’s interim report can be made on the royal commission website and must be received no later than 5pm on 26 October 2018.

The commission will release a final report, which will include the topics of the fifth, sixth and seventh rounds of hearings (focusing on superannuation, insurance and “policy questions arising from the first six rounds”, respectively) by 1 February 2019. 

[Related: MFAA reveals its thoughts on RC report]

paper ballpen

Charbel Kadib

Charbel Kadib

AUTHOR

Charbel Kadib is the news editor on The Adviser and Mortgage Business.

JOIN THE DISCUSSION

You need to be a member to post comments. Register for free today

MORE FROM THE ADVISER

PhilipLowe mb

RBA attempts to curb runaway inflation

On Tuesday (5 July) the Reserve Bank of Australia (RBA) announced at its monetary policy meeting it will increase the...

READ MORE
flood qld suburbs ta

Home loan support offered to NSW flood victims

Widespread persistent heavy rain over large swathes of NSW over the weekend and into Monday (4 July) has caused major...

READ MORE
Dr Jane Rennie CPA

Accountants to decline ‘capacity to repay’ requests

The leaders of CPA Australia, the Institute of Public Accountants (IPA), and the Chartered Accountants Australia and...

READ MORE
magazine
Read the latest issue of The Adviser magazine!
The Adviser is the number one magazine for Australia's finance and mortgage brokers. The publications delivers news, analysis, business intelligence, sales and marketing strategies, research and key target reports to an audience of professional mortgage and finance brokers
Read more