RBA and bankers' association back third party in Productivity Commission submissions
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RBA and bankers’ association back third party in Productivity Commission submissions
Brokers have increased competition and benefited consumers, according to the Reserve Bank of Australia and the Australian Bankers Association.
Both the RBA and ABA discussed brokers in their submissions to the Productivity Inquiry, which is currently investigating competition in Australia’s financial sector.
“Increased use of brokers by borrowers has resulted in greater competition among lenders via this loan origination channel”, the RBA’s submission states. Producing a range of data on brokers and their impact on interest rates, the RBA adds that “Borrowers’ capacity to source the best deal and assess the benefits of switching providers has been assisted by the introduction of brokers and comparison websites.”
The RBA particularly commends the work of commercial brokers, noting that small businesses are finding it easier and cheaper to obtain finance because of them.
The ABA, which has had a tempestuous relationship with brokers in recent years, explained in its submission that “the emergence of mortgage originators in the 1990s, largely funded by securitisation of mortgages, was a key development. Today roughly half of mortgages are originated by brokers.”
Calls for change
In May Treasurer Scott Morrison ordered the Productivity Commission to investigate competition in the financial system, in what was seen by many as a response to Labor’s call for a Royal Commission into banking.
Banks, regulators, consumers advocates and other groups have made recommendations to the commission on how competition can be improved, or whether it needs to be improved. Not all support brokers, however.
The Consumer Law Action Centre told the commission that “While mortgage brokers argue that they aid competition by helping consumers to find the best deal on the market, the reality is that mortgage brokers are under no obligation to act in the best interests of their clients or find them the best deal.”
Arguing that disclosure is insufficient, the Centre recommends addressing conflicted remuneration and legally reThe quiring brokers to act in the best interest of the client, as financial advisors are currently expected to do.
The Productivity Commission will produce a draft report in early 2018 and then a full report in July 2018.
UPDATE: MFAA Submission
The MFAA made a submission to the Productivity Commission, in mid-October, after this piece was originally published.
In the submission, the MFAA point towards the role of brokers in bringing down the barriers to new entrants in banking, by reducing distribution costs. The submission also details how brokers provide services in regional areas devoid of bank branches.
Another industry association to make a submission was the Commercial Asset Finance Brokers Association of Australia (CAFBA), which explained how commercial finance brokers help small business clients.
CAFBA called for a reduction in red tape and distanced commercial brokers from their residential lending counterparts: “we recognise that brokers have been under pressure in the media through the poor practice by some in other sectors. Despite this, commercial and asset finance brokers are highly regarded in Australia due to their professional conduct.”
Brokers have increased competition and benefited consumers, according to the Reserve Bank of Australia and the Australian Bankers Association.
Both the RBA and ABA discussed brokers in their submissions to the Productivity Inquiry, which is currently investigating competition in Australia’s financial sector.
“Increased use of brokers by borrowers has resulted in greater competition among lenders via this loan origination channel”, the RBA’s submission states. Producing a range of data on brokers and their impact on interest rates, the RBA adds that “Borrowers’ capacity to source the best deal and assess the benefits of switching providers has been assisted by the introduction of brokers and comparison websites.”
The RBA particularly commends the work of commercial brokers, noting that small businesses are finding it easier and cheaper to obtain finance because of them.
The ABA, which has had a tempestuous relationship with brokers in recent years, explained in its submission that “the emergence of mortgage originators in the 1990s, largely funded by securitisation of mortgages, was a key development. Today roughly half of mortgages are originated by brokers.”
Calls for change
In May Treasurer Scott Morrison ordered the Productivity Commission to investigate competition in the financial system, in what was seen by many as a response to Labor’s call for a Royal Commission into banking.
Banks, regulators, consumers advocates and other groups have made recommendations to the commission on how competition can be improved, or whether it needs to be improved. Not all support brokers, however.
The Consumer Law Action Centre told the commission that “While mortgage brokers argue that they aid competition by helping consumers to find the best deal on the market, the reality is that mortgage brokers are under no obligation to act in the best interests of their clients or find them the best deal.”
Arguing that disclosure is insufficient, the Centre recommends addressing conflicted remuneration and legally reThe quiring brokers to act in the best interest of the client, as financial advisors are currently expected to do.
The Productivity Commission will produce a draft report in early 2018 and then a full report in July 2018.
UPDATE: MFAA Submission
The MFAA made a submission to the Productivity Commission, in mid-October, after this piece was originally published.
In the submission, the MFAA point towards the role of brokers in bringing down the barriers to new entrants in banking, by reducing distribution costs. The submission also details how brokers provide services in regional areas devoid of bank branches.
Another industry association to make a submission was the Commercial Asset Finance Brokers Association of Australia (CAFBA), which explained how commercial finance brokers help small business clients.
CAFBA called for a reduction in red tape and distanced commercial brokers from their residential lending counterparts: “we recognise that brokers have been under pressure in the media through the poor practice by some in other sectors. Despite this, commercial and asset finance brokers are highly regarded in Australia due to their professional conduct.”
