Media Statements

The peak body representing Australia’s finance brokers has urged the major banks to stop talking up the credit squeeze and start helping borrowers by cutting interest rates, thereby following the lead of smaller banks.

Managing director of the Finance Brokers Association of Australia Peter White said ASIC chairman James Shipton was right to criticise banks at an industry summit on Wednesday.

“Mr Shipton has called out banks for blaming a credit squeeze on tough new interpretations of responsible lending regulations when the laws have been in place for more than a decade.”

The ASIC chair reportedly told banks to ‘lean in’ to their obligations saying he was unimpressed with industry reluctance to comply with long-standing laws.

“The big four banks cited increased costs when hiking rates months ago and just this week some bank leaders have tried to blame the royal commission for the credit squeeze and delays in assessing loan applications, claims APRA Chair Graeme Samuel called ‘a load of utter nonsense.’

Mr White said banks are still blaming everyone else for their shortfalls, despite ASIC forecasting increased court action against them partly because of alleged breaches of the Corporations Act, which demand services are provided “efficiently, honestly and fairly”.

He also pointed to a sharp decline in short term bank funding rates as the latest evidence supporting rate cuts.

“Smaller banks are already cutting rates and some economists are predicting two official rate cuts this year with the Reserve Bank moving to a neutral bias amid concerns about the slowing global economy and the declining housing market.

“The first official rate cuts of 2019 may be here soon, but going by history, I suspect the banks will protect their massive profit margins by refusing to pass on any cuts in full.”

Further evidence of the dominance of the big four banks came recently when many of the smaller banks, including Bank of Queensland, Bendigo Bank and Adelaide Bank warned of weaker earnings and challenging conditions.

“In the ongoing debate about the reforms impacting mortgage brokers there has never been a more crucial time for competition in the marketplace.”

The Finance Brokers Association of Australia (FBAA) has stepped up it’s public campaign to protect the industry and ensure consumers continue to benefit from market competition and lower interest rates.

FBAA managing director Peter White has been meeting regularly with senior MPs from all political parties as well as independents, and this has seen some wins since the royal commission final report was handed down in February.

“The result is the Morrison Government supports leaving the current remuneration structure unchanged which is fantastic for our industry and more importantly borrowers in Australia, but there is still a long way to go.

“We want to maintain the momentum on these issues, so we have launched a public social media campaign to call for everyone to work together so we can stop these misguided recommendations from burning borrowers and brokers and hurting the economy.”

‘Don’t Burn Borrowers’ urges brokers and the public to sign the Change.org petition to save the mortgage broking industry and urges supporters to continue to write to their state and federal MPs and candidates ahead of the May election. The campaign is supported by social media advertising and promoted through various channels including thousands of brokers and other small businesses.

Mr White said much has changed since the report was handed down with many brokers initially fearing the end of the industry and what that would mean for new borrowers.

“Our politicians have made significant changes to their position which we applaud but as we head into an election campaign, brokers will continue to campaign on appropriate commission structures and a best interest duty that works for consumers and is targeted specifically for mortgage brokers.”

Mr White said brokers also want a positive review of the clawback provision and want certainty rather than another review of brokers commission in three years.

“The ‘Don’t Burn Borrowers’ campaign seeks to remind politicians and all stakeholders that this conversation is not solely about brokers or even the survival of the industry – it’s about borrowers and limiting choice, resulting in higher fees and higher interest rates, and that will impact all of us.”

Mr White said the FBAA will continue to engage with decision-makers in Canberra and elsewhere to ensure the best possible outcome for borrowers, brokers and the broader economy after the May election.

The peak body representing Australia’s finance brokers has cautiously welcomed a decision by the Federal Government to backflip on its commitment to abolish trail commissions, which was one of the recommendations of the Hayne report from the banking royal commission.

Managing director of the Finance Brokers Association of Australia (FBAA) Peter White said it was a step in the right direction.

“I applaud the announcement by treasurer Josh Frydenberg but it won’t end our efforts to see the correct polices in place to protect consumers from the greed of the big four banks.

“The Coalition’s announcement to keep trail commissions has been delivered in a pre-election environment so uncertainty remains about how exactly this will work after the election.”

Mr White said the announcement confirms how out of touch Commissioner Hayne is and calls into question the findings of the royal commission.

“Hayne simply didn’t get it but it’s now the case that both sides of politics are now very clear on the importance of mortgage brokers.

“Both the Coalition and Labor recognise that the recommendations of the royal commission would in fact hand power back to the big four banks, which is an absurd result.”

He explained that the FBAA has been meeting regularly with both sides of politics and lobbying strongly on trail commissions, the amount of the proposed upfront commissions and the clawback provisions.

“I look forward to seeing Labor’s response to the Coalition announcement because this now opens up another point of difference in an industry that is supported by most Australians.”

Mr White said the FBAA will ask for the fine print of exactly what is proposed by both sides of politics to ensure that competition is enhanced, consumers are protected and brokers continue to offer a valuable service to borrowers.

“We don’t know who will be in power after the next election or how the upper house will work but we will continue to make every effort to ensure brokers continue to have a viable industry and borrowers are not squeezed by the big banks,” Mr White said.

The peak body representing mortgage brokers has welcomed Labor’s statement on reforms for brokers saying it will ease some of the mental health duress being felt throughout the nation.

Finance Brokers Association of Australia managing director Peter White said the announcement provides some much-needed clarity for brokers moving forward, while also ensuring transparency on commissions.

“We will continue dialogue with both sides of politics to further shape the end model so that the borrower wins and competition in the market is maintained.

“Labor’s decision to scrap trail commissions and standardise commissions at a fixed percentage of loan size is positive but there needs to be more work done around clawbacks.

“There needs to be some protective mechanism in place, and that will be one of the key issues for us moving forward.”

Mr White said the government and Labor were aligned in many of their responses to the royal commission but not all.

“Both sides of politics should be congratulated for their willingness to listen to the industry but those talks are not over yet,” Mr White said.

The Finance Brokers Association of Australia (FBAA) has hit out at “so-called consumer groups” for withdrawing from an industry forum at a time of great importance to the industry.

FBAA managing director Peter White accused the quitters of a ‘huge dummy spit’.

“Since when do legitimate advocates take their bat and ball and go home because they disagree with others?”

It’s been reported that Choice, the Consumer Action Law Centre, Financial Counselling Australia and the Financial Rights Legal Centre have left the forum which exists to improve customer outcomes, preserve and promote competition and improve standards of conduct.

“It’s ironic that they are citing the alleged failure of the group to commit to acting in the best interests of ¬borrowers, when that is the very cornerstone of the success of brokers.

“The industry has worked well with ASIC, the Productivity Commission and Treasury to bring even greater transparency and accountability. Commissioner Hayne criticised banks for their lack of transparency and culture of greed.”

“Choice is meant to stand up for consumers, but they have been found out for having commercial conflicts of interest that may have influenced their reviews. They clearly don’t understand this industry, but they seem to understand vacuum cleaners and dishwashers so maybe they should stick with these.

“The FBAA has led from the front in ensuring borrowers’ interests are the primary driver in every case. Not only are we not blocking meaningful change, as claimed by Choice, but brokers are leading the change.”

“The big banks will be the big winners if brokers are forced out of the industry, and borrowers will pay more in costs and hidden fees, so these consumer groups have basically abandoned the people they claim to represent.”

The managing director of the Finance Brokers Association of Australia has provided some timely advice for the head of the Bendigo Bank – ‘focus on your own performance instead of attacking brokers’.

Peter White said Bendigo Bank is wrong to support the Hayne recommendation scrapping commissions to brokers. “It’s timely that Bendigo Bank attacks brokers on the same day they announce weaker than expected first-half profit results.

“While the market was watching Bendigo Bank shares plunge 6.8 per cent in value, their managing director was supporting a fee-for-service model for the broking sector – a ridiculous proposition that would return market dominance to the big banks.

“Marnie Baker was quoted saying current arrangements enhance the risk of poor or conflicted advice, but she doesn’t seem to understand that brokers do not give advice, they provide credit assistance as described in legislation.”

Ms Baker also suggested a lack of competition was a contributor to the system’s woes.

“What do you think will happen if brokers are forced out?” asked Mr White. “There will be less competition and the big four banks – not Bendigo – will benefit.”

“Perhaps Bendigo Bank’s shareholders would prefer the leadership team focus on boosting their own results rather than firing shots at brokers who focus on the needs of borrowers, rather than the profit margins of banks.”

The national peak body representing finance and mortgage brokers has warned both the Federal Government and Opposition that they would be betraying borrowers if they change the remuneration structure for brokers.

Finance Brokers Association of Australia (FBAA) managing director Peter White said if implemented, the recommendations from Commissioner Kenneth Hayne would send Australia back to the dark ages where a few banks held all the power.

Mr White pointed to comments from respected finance commentator Peter Switzer today who called the royal commission’s plans for mortgage brokers “crazy”.

“The broking sector has undergone reviews from ASIC and the Productivity Commission and each time the recommendation has been not to change the structure,” Mr White explained.

“Mortgage brokers provide competition and choice, and give borrowers lending options that most people are just not aware of, and these options enable borrowers to get better outcomes.”

He also said commentary that criticised broker commissions was misinformed and hypocritical.

“Talk about conflicted commissions misses the point, as every business person’s remuneration is conflicted because everyone wants to do business.

“The issue is transparency, and brokers already disclose commission under the National Consumer Credit Act, which was established after lobbying from our industry.

“Unlike the banks which have done business for years under a shroud of secrecy, the broking industry has pushed for openness and transparency, better business practices, and tough penalties for any broker that does the wrong thing.”

He said talk that the current system incentivises brokers to write higher loans is “just rubbish”.

“The average broker-written loan is $30,000 higher than the average bank-written loan for a variety of reasons which range from the income level of the borrower to high percentage of loans written by brokers, and the difference in commission is equivalent to a cup of coffee per month – hardly an incentive!

“Brokers service people, and people want to deal with brokers and they are happy with the commission structure. Fiddling with this isn’t going to help borrowers, it’s going to hurt them.”

The national peak body representing finance and mortgage brokers says the royal commission has failed to understand the role of mortgage brokers and the competitiveness they bring to the market following its recommendations to eliminate trail commissions for brokers, which the Government has implemented from July next year.

Managing director of the Finance Brokers Association of Australia (FBAA), Peter White said today should be the day of reckoning for big banks who have spent far too many years putting profits above people, yet the result of eliminating trail commissions could realistically mean interest rate hikes.

“This could force up-front commissions to rise in order to compensate for reduced revenues to brokerages, which in turn will lift interest rates and make housing affordability more difficult,” he explained.

He also slammed the recommendation to eliminate up-front commissions, and congratulated the Government for not reacting to this.

“Commissioner Hayne wants to hand even more power to the big banks and eliminate competition, which is a ridiculous scenario and shows just how out of touch he is when it comes to brokers.

“If a user-pays model was implemented, we know that most borrowers wouldn’t pay, and banks would make more money and standards would drop further.

“It’s very disappointing that the royal commission wants to destroy some 20,000 small businesses for the monetary gain of the big banks, and we trust the Government will see clearly on this and continue to work extensively with our industry to improve consumer outcomes.”

Mr White said borrowers trust and support brokers.

“There is a reason why over 59 per cent of loans are written through brokers. Customers have no issues with broker commissions.

“Customers get a better outcome by using a mortgage broker. They get better service, more choice and a well trained finance expert to take them through what is a massive and stressful time of their life,” he said.

He also pointed out that the broking sector was well already ahead of the game, having been through reviews from ASIC and the productivity commission.

As the busiest time of the year looms for retail sales the peak body for finance brokers in Australia has warned that changes coming into effect on January 1 will impact credit card holders, and eventually anyone applying for a mortgage or personal loan.

Finance Brokers Association of Australia managing director Peter White said the changes could make it even harder to obtain credit, potentially pushing house prices down further and hitting consumer spending and the broader economy.

“I have been in Canberra this month arguing against these changes in their current form. I think there is a general lack of awareness about the serious impact this will have on the deemed capacity of a borrower to repay their debts,” Mr White said.

The Australian Securities and Investments Commission (ASIC) has introduced new assessment criteria to be used by banks and credit providers when assessing the serviceability of new credit card contracts or credit limit increases for consumers.

ASIC has confirmed that whenever a loan provider is assessing a mortgage application, or any application for a loan, they must take into account the ability of the borrower to pay the entire credit limit of every card the applicant has, over a period of three years.

If a card holder has three cards each with a $10,000 limit the serviceability has to include the borrower’s ability to pay back the full $30,000 in a three-year period, as well as being able to service other loans. This applies even if the applicant has a zero balance.

Under the changes credit providers will also have to assume an interest rate that is two per cent above the highest rate in the market which is currently 22 per cent.

Previously the card holder simply had to show they could repay their credit card based on three per cent of the limit each month as the minimum repayment.

Mr White said the ruling is unfair on credit card holders who diligently pay their balance off every month, or never use their card.

“I think ASIC has got this one wrong and I have told them so in a formal submission. I have also met with relevant ministers and I believe this will be reviewed because the Government now understands the implications of this change on our retail economy and the housing market.”

In response to concerns raised, ASIC has deferred the introduction of the higher serviceability on credit cards when assessing all other loans including mortgages until July 1, 2019.

The Finance Brokers Association of Australia (FBAA) has revealed that the Australian Securities and Investments Commission (ASIC) has given finance brokers an early Christmas present with confirmation their credit representative licence fees have been reduced as a reward for the sector’s professionalism.

The financial services regulator has reduced the cost to act as a credit representative for brokers from $104 to just $16.48 annually due to the decreased cost of enforcement.

FBAA managing director Peter White said the confirmation of reduced fees means brokers are being rewarded for doing the right thing by their clients.

“ASIC operates on a cost recovery method which means they only charge fees that cover the costs of enforcing to the industry.”

The total cost of legal enforcements against mortgage brokers started at $15.6 million dropping to under $9.1 million mid-year before being revised this month to $5.74 million, nearly a third of the original cost.

Mr White said the turnaround for brokers comes as the royal commission, ACCC, ASIC and others have found banks are failing borrowers amid a culture of bad behaviours and a lack of transparency.

“While banks have been exposed for their poor practices, brokers are being recognised for being best of breed. The professionalism of the industry and the ability of brokers to deal with any poor behaviour swiftly is paying dividends.

“The standard of our brokers and our own monitoring practices have improved markedly and that is why ASIC has revised its fee schedule. We hope they will continue to be able to reduce the fees as we improve what we do and demand the high-standards that borrowers expect and deserve,” Mr White said.