MFAA chief executive Phil Naylor has issued a warning to brokers that only recommend a couple of lenders: disclose the lenders you deal with to all clients or risk being in breach of the NCCP legislation.
Speaking to The Adviser, Mr Naylor said while the broker proposition was traditionally founded on the idea that brokers offer borrowers an array of options from multiple lenders, there is nothing inherently wrong with offering just one or two lender products - so long as they disclose this to their clients.
“If a broker tells their clients that they only deal with one or two lending institutions, then there are no legal ramifications,” Mr Naylor said.
“Under NCCP, brokers are required to outline exactly who they do business with. If they do this, then they are fine. At the end of the day, it is the borrower’s choice.
"If they are happy for their broker to deal with one or two lenders, there is no concern.”
Mr Naylor said the broker proposition had evolved beyond a choice of lenders.
“Today, brokers provide their clients with financial guidance, not just choice.”
Mr Naylor’s comments just one week after Bendigo and Adelaide Bank’s general manager, third party lending Damian Percy said brokers that submit the vast portion of their business to one particular lender could be considered agents to that institution, rather than a broker.
“The term broker infers that borrowers will get a choice of lender products. However, if you are sending more than 60 per cent of all your business to one particular lender, can you really call yourself a broker?” Mr Percy said.
“At what point do you stop being a broker and start being an agent for one particular lender?”
Mr Percy's comments come at a time segmentation has taken centre stage. Homeside recently abandoned its tiered offering, while Westpac and CBA continue to strongly endorse the business model and in recent days ANZ has indicated it will focus more closely on high volume brokers.