Both industry associations have called for “greater transparency” in broker separation letters issued by lenders to ensure due process.
Reports of an industry “blacklist” have emerged in mainstream media, with several mortgage brokers – represented by Matthew Bransgrove, partner at Bransgrove Lawyers – claiming they have been unfairly prohibited from engaging in credit activities after having their accreditations frozen.
The brokers have alleged that they have been prevented from switching aggregators by being denied a “clean separation letter”, that is, a separation letter containing a “no adverse conduct” clause.
According to the brokers, the separation letters issued by lenders to aggregators fail to disclose in detail the reason behind decisions to freeze their accreditation, which in turn prevents them from contesting the allegations.
In response, the Mortgage & Finance Association of Australia (MFAA) and the Finance Brokers Association of Australia (FBAA) have backed reforms to the process, calling for “greater transparency” in the separation letters issued by lenders.
In a statement to The Adviser, MFAA CEO Mike Felton commented: “The MFAA remains firmly of the view that broker separation processes adopted by lenders and aggregators require greater transparency and procedural fairness.
“The MFAA is committed to working with regulators and industry stakeholders to assist in addressing this matter.”
Mr Felton said reforms to the process are particularly pertinent in light of the implementation of recommendation 1.6 of the banking royal commission (to “report serious compliance concerns” about individual licencees), which recommends that ACL holders “be bound by information-sharing and reporting obligations” that financial advisers are subject to.
Mr Felton’s sentiments were shared by the managing director of the FBAA, Peter White, who added that separation letters “need to be clear and succinct” and provide evidence of alleged wrongdoing by the broker in question.
Mr White said the absence of any proof creates an “anti-competitive” environment.
“If lenders are going to terminate brokers, they need to stump up with proof and have evidence as to what their decision is based upon and to be transparent about that,” he told The Adviser.
“Otherwise, they’re potentially creating anti-competitive practices in the marketplace, so people could be unfairly having their accreditations terminated without having the right to defend their position.”
He continued: “As far as I’m concerned, if you can’t prove something, you’re basically disadvantaging somebody’s ability to earn an income – that’s anti-competitive and that needs to stop.
“Before you send the letter, get your proof, back your proof and be transparent about what’s going on,” he continued.
“At the end of the day, natural justice has to occur. If that hasn’t occurred, then we’re not going to play bat and ball on rumour and innuendo.”
The Adviser reached out to several aggregators for their perspective on the matter, many of whom declined to comment.
However, PLAN CEO Anja Pannek told The Adviser that the aggregator has always sought the best interests of its members.
“We are firmly committed to operating in the best interests of our members and our industry and hold ourselves to the highest standards including advocacy for our members,” she said.
“We know the vast majority of brokers uphold high standards and work tirelessly to deliver great customer outcomes, while operating in accordance with relevant legislation and regulatory codes.”