The body’s submission to Treasury’s lead generation consultation has highlighted the potential for reforms to unintentionally impact legitimate referrals.
The Mortgage and Finance Association of Australia (MFAA) has warned reforms to referrer relationships could unintentionally impact small businesses unless they are carefully targeted, as part of the body’s submission to Treasury’s consultation on lead generation.
While the industry body said it supports reforms that target “high-pressure, product-driven” lead generation practices, it also warned that these reforms could also have “unintended consequences” for legitimate broker referral relationships.
It also said legitimate business-to-business referral arrangements should be treated differently to high-pressure lead generation models such as cold-calling.
The MFAA also noted that brokers were already subject to referral arrangements within the National Consumer Credit Protection Act 2009 (NCCP Act).
“Referral arrangements in mortgage broking commonly arise through existing professional relationships between brokers and trusted advisers such as accountants and solicitors, rather than through cold-calling, consumer data harvesting or mass-market lead generation models,” the submission read.
“Importantly, the NCCP Act limits choice and of referrers, prohibits referrers from providing credit advice or influencing product choice, and requires disclosure of benefits and consumer consent.
“Where a referrer moves beyond this limited role, licensing obligations are triggered, creating a clear regulatory boundary between referral activity and regulated credit assistance.”
Recommendations for Treasury
At the heart of its submission, the MFAA said that reform should separate the oil from the water: legitimate referral relationships should not be emulsified with harmful lead-generation practices in a single, broad-brush regulatory response.
The industry body also offered the following recommendations:
- Legitimate business-to-business referral arrangements should be treated differently from high-pressure lead generation models.
- Broad measures, such as licensing requirements or bans on unlicensed communications, could unintentionally capture low-risk referral activity already operating appropriately within the credit sector.
- Any increase in licensee responsibility should reflect the level of control or influence they actually have over the activity.
- Remuneration reforms should focus on arrangements that create product bias or poor consumer outcomes.
- Reforms should remain focused on harmful practices such as consumer steering, cold-calling, and mass-market lead generation models.
Spotlight on lead generation
Treasury’s consultation forms part of the government’s consideration of options to address the factors behind the collapses of the Shield Master Fund and First Guardian Master Fund.
The paper notes that investors were allegedly contacted by lead generators after responding to social media advertisements or using online superannuation “health check”, “find my lost super”, or “compare my super” tools, before being referred on to financial advisers.
Those consumers were then allegedly advised to switch existing superannuation into a choice fund or establish a self-managed super fund (SMSF), facilitating investment into the funds.
The alleged conduct that resulted in consumer losses involved a chain of interconnected entities spanning lead generators, referrers, and advisers.
Among options outlined for consultation, Treasury suggested enhancing accountability for the conduct of lead generators, extending anti-hawking requirements, targeting remuneration structures that may incentivise poor conduct, and intervening earlier in advertising and marketing practices.
The government said it will consider feedback from consultation to determine areas of the regulatory framework that need strengthening, with the outcomes of regulator enforcement and litigation also expected to inform deliberations.
[Related: Industry demands clarity as CSLR costs soar 82%]
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