CDR action initiation would benefit brokers, FBAA tells Senate

The committee was hearing from witnesses about their thoughts on the impact of the Treasury Laws Amendment (Consumer Data Right) Bill 2022. This looks at expanding the Consumer Data Right to enable consumers to instruct accredited users to initiate actions on their behalf.

These actions could include switching providers, making a payment, opening and closing an account, and updating personal details (such as an address) across providers.

The broker association said it was “very supportive” of the idea of giving brokers the ability to initiate actions on behalf of clients who have given them access to their financial data via the open banking regime.

Currently, the regime only enables brokers to receive and read data shared by a consumer under the Consumer Data Right (CDR) through the ‘trusted adviser’ model.

However, the FBAA said that expanding this to enable brokers to go a step further would speed up the mortgage process for borrowers.

Mr White flagged that the first use cases of brokers utilising open banking had only just begun this year, so it was “a bit early” to comment on the regime’s effectiveness and whether the industry would be supportive of action initiation, however, he said the FBAA believed action initiation to be “an appropriate next step in the CDR”.

The FBAA’s regulatory compliance consultant, David Carson, added that the expansion would “round out the regime so it’s not just about access sharing but enabling the consumer to be able to then instruct action on that information”.

“That really makes the regime work properly rather than getting it set up to work and then having it ‘cut out’ and have the consumer or the adviser then have to do further work,” he said.

“Effectively, the mortgage broker, without the CDR [action initiation change], can make recommendations to the consumer, but the consumer must action those recommendations and must complete an application to switch finance or apply for new finance with a different provider. 

“CDR [action initiation] takes that step out and says: ‘We’ve now got the information we need’. The mortgage broker has discharged their obligations, assisted the consumer to find the right product, and the consumer says to the mortgage broker: ‘Go ahead and get it done’. 

“It’s excellent from that point of view because it becomes an end-to-end transaction, from the consumer engaging their agent — essentially their mortgage broker agent — to help them find and establish the new finance product for them.”

While the association said it was broadly supportive of the open banking regime, it did reiterate some concerns regarding limitations.

For example, Mr Carson explained that the current open banking regime enables consumers to appoint a trusted adviser to receive information about the consumer so that it can then be factored into an assessment and assist the consumer to source finance. However, he flagged that this is only limited to mortgage brokers and does not extend to finance brokers.

“So ... if a person has a mortgage broker, because they provide assistance in relation to home loans, they would be able to participate in the CDR and have a consumer give them instructions; whereas a finance broker who doesn’t provide credit assistance in relation to home loans but does provide credit assistance in relation to other finance, for example motor vehicle finance, would not meet the definition of a mortgage broker and therefore would not meet the definition of a trusted adviser,” he told the committee.

“So a consumer would not be able to appoint a finance broker as a trusted adviser, so that they could then receive consumer data to assist them to source motor vehicle finance.

“So you’re missing that vital link that completes the benefit of CDR to the end user — to the consumer — of them being able to have that information shared with the finance broker and then to be able to then instruct the finance broker to go ahead and submit the loan on their behalf.”

Mr Carson added that expanding the regime to include finance brokers could also improve data protection in the finance sector, as “if a consumer wants to apply for finance through a broker, they will likely email a lot of their documents”.

“There are provisions to make bank statements available online through secure portals, but the methods of document transmission are still anchored in the older technology of emailing and sending them in. So I think any push to have that data controlled by entities that are subject to more stringent requirements would mean that the integrity of that data is better, it would mean that lenders and brokers can place greater reliance on that data not being fraudulent, and it also gives a greater level of protection to the consumers because the holders of that data meet certain minimum requirements before they’re entitled to deal,” Mr Carson concluded.

“Overall, we’ve been very supportive of the move for the CDR because we think it will produce a better customer experience; it will produce a better service provider experience; and it will increase the integrity of the whole process, which I think is important.”

The Senate economics legislation committee is expected to hand back its final report to the Senate by 3 May 2023.

[Related: First aggregator turns on open banking for brokers]