Q&A on flex commission ban with FBAA's Peter White

ASIC announced last week that it will be banning flex commissions in the car finance market. MPA asks the FBAA's Peter White on what the decision means for brokers.

MPA: Is the banning of flex commissions a good result for brokers? 
Peter White:
The banning of flex commissions is a great result for brokers because it will ensure there is a fair and even playing field between car dealers and brokers. It will also result in transactional transparency of commissions meaning borrowers are more informed as well. We must have the right conduct to achieve the right outcomes and truth comes through transparency.

It is important to note that flex isn't entirely being banned. However, dealers will be prohibited from being able to increase interest rates with the aim of receiving a higher commission. Car dealers will still get their floor plan offset, but once the new legislation comes into being in 18 months time commissions will be built into the interest rate as set by the lender.

MPA: You've long called for point-of-sale exemptions to be banned: do you consider this mission accomplished? 
I have long called for point-of-sale exemptions to be removed, but it is a matter for the minister which is next on my agenda. I believe we will be successful and am already drafting our proposal on this. Discussions late last year suggest that the regulator would also see this achievement as being positive.

MPA: Is the FBAA's support for ASIC changing commission arrangements a dangerous move, given mortgage brokers' remuneration is under review? 
PW: No, as commissions in the motor sector are not being banned. Car dealers will still get commissions, but going forward it will be in a similar manner as home loan commissions (i.e. the commission is built in the interest rate as set by the lender) and the car dealer will not be able increase the interest rate to receive more commissions. 

MPA: Do you approve of ASIC allowing dealers to offer a discount on the interest rate, and thus lower commissions? 
I approve of ASIC allowing dealers to offer a discount on the interest rate, and it was the FBAA who pointed out to the regulator that this should continue, contrary to the initial draft wording. The motor industry has always had this ability and to ensure best consumer outcomes are achieved, this needs to continue. 
(Note this new regulation starts in 18 months.) 

MPA: How can brokers use this rule change to diversify their businesses?  
Brokers will now be able to compete on a much closer level with motor finance. Brokers will have a much better opportunity to market this style of business to their clients, knowing their ability to secure the customers business in this area is much greater than before.
Add your comment
  • Robert2/01/2018 1:35:57 AM

    Peter White drunk again on his own false optimism , this bloke truely is a fool removing flex removes competition not the other way around most consumers know how to negotiate a better deal on cat finance and go with the best rate and lender found online and it’s actually the bad credit duds who pay higher rates because simply they have bad credit. The FBAA and ASIC cowboys are on the regulation destruction of the industry implementing Nanny State policy.

    Also why should the industry have the FBAA when there is already credit licencing it seems brokers are paying member fees to a non productive entity that jumps in bed with the regulator.

  • Paul10/03/2017 10:21:15 AM

    All of the above is further proof that the FBAA acts solely for mortgage brokers. Im an FBAA member operating in the car finance market and will be directly impacted by this. Now even harder to compete with dealers as theyre still not required to have an ACL, disclose commissions, pay FBAA, ASIC, PI ins etc. The FBAA has no idea about the asset finance market.


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