Media Statements

The nation’s peak body for finance and mortgage brokers says ongoing speculation on the Reserve Bank’s likelihood of increasing official interest rates is causing instability in the market.

The Finance Brokers Association of Australia (FBAA) says if rates are going to trend upwards, it would be better if it happened sooner rather than later because it would help to stabilise the economy.

“Delaying a decision doesn’t do anyone any good,” said FBAA executive director Peter White.

“If that’s the way it’s going to go, as has been suggested, it should probably start earlier so borrowers can prepare themselves when considering what loans are best suited to them.

“Fixed rates need to be factored in to the equation to ensure that increases do not negatively impact family budgets and future family needs.

“At the moment, the greed factor seems to reign with banks and if they hadn’t engaged in margin creep with interest rates over the past couple of years, we wouldn’t be in this potential position.”

Mr White said Australia would have a better-balanced economy if interest rates sat around the 6.0 per cent to 6.5 per cent mark.

“As it is, a vast amount of lending is based at a level two per cent above the prevailing borrowing rate for serviceability of a loan and that will help to ease any future rate increases from causing hardship.”

Media Contacts: Brian Lowe – 0434 791 084 // Barbara Gorogh – 0435 909 608

The new Australian Financial Complaints Authority (AFCA) being planned by the federal government will be good for consumers, according to the peak body representing Australia’s finance brokers, the Finance Brokers Association of Australia (FBAA).

The formation of AFCA has been criticised in the media by some smaller financial services firms and the Credit & Insurance Ombudsman (CIO), who claim it will favour the big banks and therefore won’t be trusted.

However, FBAA executive director Peter White said the new body will be focused on even better outcomes for small businesses and consumer borrowers, as has always been the case, not associations.

“The amalgamation of the Financial Ombudsman Service (FOS), the CIO and the Superannuation Complaints Tribunal (SCT) will improve systems that will lead to better consumer outcomes.

“We believe it will speed up turnaround times and streamline case management processes without the non-alignment of processes by two separate ombudsmen.

“The CIO needs to remember the ombudsman service is about borrower disputes being resolved and not industry bodies. There is no basis or substance to call for a royal commission into this.”

Mr White has also described as baseless, the criticisms by smaller firms that they will end up subsidising a scheme which accommodates the major banks.

“There is no evidence at all to support those claims.”

He said the FBAA fully supports the government’s initiative to create AFCA.

Media Contacts: Brian Lowe – 0434 791 084 // Lyall Mercer – 0413 749 830

A suggestion by the Finance Sector Union (FSU) to restructure brokers’ incomes is flawed, according to the Finance Brokers Association of Australia (FBAA).

The union believes there should be a universal income structure for bank employed mortgage salespeople and external mortgage brokers, however, FBAA executive director Peter White said a fee-for-service model in home loan broking won’t work.

“A broker is doing a large part of the work for the lender, therefore, it is commercially appropriate for the bank to pay them a commission for doing that work,” said Mr White.

He says while the union is very proactive in protecting the income rights of bank employees, it shouldn’t lump financial planners together with finance brokers because the two are vastly different.

“A finance broker does not give advice, as per the NCCP, but offers guidance on lending options and then assists a client through the application process to settlement, as per the lenders credit rules.

“Financial planners give advice and need to be independent as they can influence an investment market’s performance – returns and outcomes, whereas home loan brokers cannot influence any market outcomes.”

Mr White says there are around 25,000 brokers in Australia and the FSU proposal to restructure their incomes in this fashion would have a serious and negative financial impact on them.

“It potentially could cause brokers’ businesses to collapse and throw employees out of work.”

He says the FSU wants to protect the income and employment rights of banking employees, but brokers also employ people, so their staff employment rights must also be protected in addition to their business.

Media Contacts: Brian Lowe – 0434 791 084 // Lyall Mercer – 0413 749 830

A new $6.2 billion levy over four years on the top five banks contained in the federal budget has been cautiously welcomed by the Finance Brokers Association of Australia (FBAA), but it warns the decision could backfire on borrowers if the banks react badly.

FBAA executive director Peter White said while the government’s move is aimed at helping smaller banks compete with the big five, there is a risk the big banks could increase interest rates to cover the tax.

“I dare say the banks won’t simply absorb this levy, and if they don’t, this will be a bad outcome for home loan and business borrowers.

“It’s possible the banks could raise interest rates and that could put housing affordability out of the reach of more borrowers, so we are urging the banks to give an ironclad guarantee that they won’t pass on those costs.”

Meantime, Mr White hails as a good move the budget initiative to bring forward a comprehensive package of reforms to strengthen bank accountability and competition.

“The banks will need to be more accountable with the government to legislate a new banking executive accountability regime.

“It will increase competition in the financial system and improve consumer choices.”

Other components of the budget relating to small business also meet the FBAA’s approval, including the extension of the $20,000 immediate tax asset write-off for businesses with up to $10 million turnover.

The tax rate for small business is now at 27.5 per cent with the government aiming to lower that to 15 per cent.

Mr White said the budget also contained positive news for finance and mortgage brokers in other areas such as the government accepting all eleven recommendations of the Ramsey Review to combine the two industry ombudsman services into the Australian Financial Complaints Authority (AFCA).

The FBAA advised in December last year that such a move would bring better consumer and business outcomes for those needing to access this service.

He said the FBAA had also been signalling over the past eleven months that the treatment of serviceability for credit cards needs to be based on repaying the limit on a principal and interest basis over a defined term.

“The government has now confirmed this will be the case, among other beneficial consumer reforms, the banks will need to comply to.”

Media Contacts: Brian Lowe – 0434 791 084 // Lyall Mercer – 0413 749 830

Australia’s peak body representing finance brokers has urged borrowers to avoid choosing a mortgage based on incentives offered by lenders, as it could lead to unsuitable loans.

Executive director of the Finance Brokers Association of Australia (FBAA) Peter White, says reports that incentives such as cash discounts and overseas trips are being dangled in front of customers deemed to be low risk or high-net-worth borrowers, are worrying.

He said borrowers with job security and good credit are being targeted.

“As nothing is free these days, banks that offer incentives to borrowers need to be careful that they are not overlooking what’s in the best interests of their customers,” he said.

“A mortgage is a long-term commitment and it is foolish to lock yourself into a contract for such a large amount of money for the sake of a short term financial benefit.

“You also need to read the fine print as you may be agreeing to be inundated with emails for insurances, financial planning, or other cross-promotional services by the lender.”

He said while offering incentives is not necessarily unethical, it could be considered a grey area.

“ASIC and Treasury via the Minister for Revenue and Financial Services are looking at this right now under the NCCP, as incentives potentially put at risk consumers’ best outcomes.”

He also questioned the need for lenders to go down this route. “If the lender has the margin for incentives like this, you’d naturally ask why they can’t provide a lower interest rate or other long-term benefits.”

Mr White says the practice is yet another reason finance brokers now arrange over half the mortgages in Australia.

“Finance brokers know the market and can provide an expertise to ensure that the loan is not unsuitable for the borrower.

“When you use an industry-accredited FBAA broker, you are also protected by professional indemnity insurances and dispute schemes.”

Media Contacts: Brian Lowe – 0434 791 084 // Lyall Mercer – 0413 749 830

Global research by the Finance Brokers Association of Australia (FBAA) has shown that Australia is the only country in the world where clawbacks exist.

The research was conducted by the FBAA as part of its submission to the Australian Securities and Investments Commission Home Loan Commission Review for Minister for Financial Services Kelly O’Dwyer.

Executive director Peter White says the stumbling block is banks wanting to gain or hold market share in their lending portfolios.

“Brokers in Australia are clearly meeting the demands of the borrower market place and lender cost-effective distribution needs,” commented Mr White.

“Clawbacks abuse the broker channel which the banks have prospected for some 27 years, but now we are seeing some banks and non-banks offering products with no clawbacks.

“If clawbacks don’t exist in the rest of the world, then there is no excuse for them to exist here.”

Mr White points out that unfair clawbacks reflect circumstances that are beyond the control of brokers.

He says a death, divorce, the sale of a house, termination of loans one or two months before the clawback period ends and bank movement from broker portfolio to branch portfolio are things that can’t be controlled by brokers.

Mr White says the FBAA is petitioning domestic lenders to remove all unfair clawbacks which he says are restricting new entrants into the industry.

Their research also revealed that brokers in Australia are among the lowest paid in the world.

In countries where there are no trail incomes, brokers are paid between 1 per cent and 3 per cent as their upfront commission with no clawbacks.

“In Australia, whereby a broker may receive 0.6 per cent upfront and 0.15 per cent trail on the amortised loan balance, they might achieve on the average life of a loan – being approximately 3.5 years – around 1.1 per cent in total commission over time,” added Mr White.

“The average commission paid as an upfront from our researched countries is 1.26 per cent and the average trail income, where paid, is 0.20 per cent.”

In countries where trail commissions are paid, there are better lender and customer outcomes and reduced churn of portfolios.

Media Contact: Brian Lowe – 0434 791 084

The Finance Brokers Association of Australia (FBAA) believes the three-month period set aside for submissions on the Australian Securities and Investments Commission (ASIC) report into mortgage broker home loan remuneration is far too long.

Interested parties have until June 30, 2017 to give their feedback to the Treasury Department.

“This is a poor outcome and the length of time is completely unnecessary,” said FBAA executive director Peter White.

“Six to eight weeks would be more than enough time to get it done.

“This extracted period only creates longer industry angst as we wait for a conclusion of outcomes and progression of discussions.”

The association also believes that the federal government has erred in tasking Treasury with accepting submissions, suggesting that it is the wrong department to deal with them.

“This should have been put back into the hands of ASIC to progress industry stakeholder discussions, as they are far more informed about the industry and the current remuneration issues,” continued Mr White.

“The government needs to ensure they do not destroy small business confidence by engaging poor processes that create no additional benefit for regulatory outcomes.”

He said bringing Treasury into the mix at the last minute creates more unnecessary work for the industry.

“ASIC, not Treasury did the review, so Treasury has no base or depth of knowledge of the 27-year plus history of finance broking as ASIC now has.”

Media Contacts: Lyall Mercer – 0413 749 830 // Brian Lowe – 0434 791 084

The Finance Brokers Association of Australia (FBAA) believes the three-month period set aside for submissions on the Australian Securities and Investments Commission (ASIC) report into mortgage broker home loan remuneration is far too long.

Interested parties have until June 30, 2017 to give their feedback to the Treasury Department.

“This is a poor outcome and the length of time is completely unnecessary,” said FBAA executive director Peter White.

“Six to eight weeks would be more than enough time to get it done.

“This extracted period only creates longer industry angst as we wait for a conclusion of outcomes and progression of discussions.”

The association also believes that the federal government has erred in tasking Treasury with accepting submissions, suggesting that it is the wrong department to deal with them.

“This should have been put back into the hands of ASIC to progress industry stakeholder discussions, as they are far more informed about the industry and the current remuneration issues,” continued Mr White.

“The government needs to ensure they do not destroy small business confidence by engaging poor processes that create no additional benefit for regulatory outcomes.”

He said bringing Treasury into the mix at the last minute creates more unnecessary work for the industry.

“ASIC, not Treasury did the review, so Treasury has no base or depth of knowledge of the 27-year plus history of finance broking as ASIC now has.”

Media Contacts: Lyall Mercer – 0413 749 830 // Brian Lowe – 0434 791 084

The Finance Brokers Association of Australia (FBAA) says the ASIC report on finance broker remuneration that was released yesterday is positive for the industry and an endorsement of the FBAA’s position and public comments.

FBAA executive director Peter White said he was privileged to have viewed the key findings and proposals under confidence four weeks ago.

“In general it is a very good report and supports what I have said for the past twelve months or more in that base-line commissions are perfectly responsible in our market place and they should not change, while incentives that promote volumes risk poor consumer outcomes and must go.

“Truth comes through transparency, and therefore ownerships and disclosures proves that we as an industry have nothing to hide.

However he said that whether some of the data goes far enough to form conclusive outcomes, is a question that needs to be discussed further.

“There are a couple of such matters that we have already raised and will be further discussing with Treasury.”

Mr White said the FBAA is continuing in-depth discussions with ASIC on several fronts, and is formulating its response to Treasury in conjunction with input from members and key industry stakeholders.

“We look forward to further discussions with Treasury and we continue to be confident in the positive and sound position brokers’ value-proposition holds for borrowers.

“For now we need to absorb all that is within this paper and make informed positive responses knowing that fundamentally we have a strong, solid industry that will have every opportunity to attain over 70 per cent origination market share in home lending in Australia.”

Media Contacts: Lyall Mercer – 0413 749 830 // Barbara Gorogh – 0435 909 608

Following successful professional development initiatives in other regions across the country, the Finance Brokers Association of Australia (FBAA) is tomorrow night hosting a dinner with players from the Geelong Cats and almost 100 finance brokers from the greater Geelong area.

Held at Simonds Stadium, participants will earn PD points, hear from FBAA executive director peter White, who will provide a regulation and legislation compliance update, and receive a property update from WPB property group, a tier one valuation firm.

The subject of leadership will also be on the agenda and local brokers will learn from members of the Geelong Cats leadership group including forward Rhys Stanley and former player, Brownlow medallist and triple premiership winner Jimmy Bartel.

FBAA Victoria state president Brendon Kurtz said the night is “a part of the commitment of FBAA to bring quality professional development to regional Australia.

“We recognise that many brokers are situated outside of the capital cities, and to see so many supporting this event and taking advantage of these opportunities is great for the industry.”

Media Contacts: Lyall Mercer – 0413 749 830 // Barbara Gorogh – 0435 909 608