ASIC To Review Broking Practice
ASIC has recently released a scoping paper looking into remunerations and commission structures for the Mortgage Broking industry in Australia. ASIC released ‘Broker Remuneration Review – Scoping Discussion Paper’ and commenced round table discussions with industry bodies to explore current regulations around broker remuneration and risk assessment.
The AFG (Australian Financial Group) which is Australia’s largest mortgage broking group, has weighed in on the paper, with Director Brett McKeon issuing a statement on behalf of the AFG:
“Most brokers are willing to invest their time and effort helping potential borrowers even if there is no certainty that it will result in a commission. This includes facilitating pre-approval for a buyer who is embarking on the house hunting process or simply helping consumers evaluate their borrowing capacity. If brokers were prohibited from earning commission, this would limit the extent of advice that they were able to give as borrowers are likely to be reluctant to pay upfront fees for advice.”
The AFG has called for big banks to support their relationship with mortgage brokers and many independent brokers agree with his comments.
Mr McKeon added that: “A viable mortgage broking sector is crucial for retaining an element of competitive pressure in the mortgage market. Many of Australia’s smaller lenders rely on mortgage brokers to act as a distribution network for their products.”
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The general consensus from Australian Mortgage Brokers is that the Big 4 banks have had lending practices all their own way for a long time and that an insistence of greater transparency in the industry must be demonstrated by all sectors of the lending community not just small operators. The large institutions have been renowned for a lack of transparent practice and must also be willing to be open and clear about lending practices. For a detailed look at the ramifications of the scoping paper Click Here:
ASIC has initiated this scoping report to provide a final report by the end of the year. It is uncommon that ASIC would so public open the scope of the report to the industry itself and is a good sign that ASIC is willing to step up and demonstrate some of the transparency and accessibility in the consultative process that it aims to implement in the market.
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