The broking industry should not be “regulated out of existence”, a former Senate crossbencher has said, adding that borrowers are happy with the “fee-free” service offered by the third-party channel.
Outgoing senator and leader of the Liberal Democratic Party David Leyonhjelm has expressed strong opposition to the federal Labor opposition’s proposed broker remuneration policy.
In response to the banking royal commission’s final report, shadow treasurer Chris Bowen stated that, if elected to government, the Labor opposition would ban trail commission payments to mortgage brokers from 1 July 2020 and introduce a fixed upfront fee of 1.1 per cent.
Senator Leyonhjelm, who recently abdicated his seat in Canberra to pursue a position in the NSW Legislative Council, has warned that a trail ban would threaten the viability of the broking industry and “demean” satisfied borrowers.
“I oppose a ban on trailing commissions,” he told The Adviser. “I believe that fee-free mortgage brokers shouldn’t be regulated out of existence.”
He added: “[Many] borrowers are happy with this service and should not be demeaned as naive victims of exploitation.”
The outgoing senator is the latest crossbencher to express public support for the current broker remuneration model, with Australian Conservative senator Cory Bernardi stressing the importance of the broker proposition.
Mr Bernardi issued a warning against legislative reforms that would bolster bank profitability to the detriment of the broking industry.
“The collateral damage from the royal commission are mortgage brokers, and the commission’s targeting of them will only serve to wreck one industry and further profit the banks,” he said.
“Overwhelmingly, I use a mortgage broker because they make my life easier, and if the legislation in reaction to the commission’s recommendations destroys the mortgage broking industry, ordinary Australian consumers will be worse off in terms of choice and convenience.”
One Nation leader Pauline Hanson has also noted her opposition to broker remuneration changes.
Following the release of the banking royal commission’s report, Ms Hanson criticised commissioner Kenneth Hayne’s call for a borrower-pays remuneration model and backed the preservation of both upfront and trailing commissions.
Ms Hanson said that the proposed ban on upfront and trailing commissions paid to brokers, as outlined in the banking royal commission’s final report, has “jeopardised the survival of more than 17,000 small businesses across Australia”.
“That’s the number of mortgage brokers providing loans to mums and dads, who rely on upfront and trailing commissions paid by the lender to survive,” Ms Hanson said. “Take those commissions away and make the borrower pay and you will decimate the industry.”
She added: “That’s tens of thousands of jobs, millions of dollars in tax revenue and much less competition for the big banks.”
The Adviser also reached out to Andrew Wilkie, independent member for the federal seat of Denison, who said: “I’m in the process of meeting with consumers and industry representatives but am unable to comment further until I see the detail of any Labor federal government proposal.”
Mortgage industry leaders have been campaigning policymakers ahead of the federal election, with CEO and co-founder of Australian Mortgage Marketplace Graham Anderson the latest stakeholder to discuss potential broker remuneration changes with the Labor opposition.
However, according to Mr Anderson, the Labor Party is “sticking to its guns” on broker commissions.
“[Whether] we like it or not, that is what they are going to stick to. So, at least now we know what we have to plan for,” he said.
“We are pretty happy to have that clarity now.”