Release of Royal Commission interim report
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was released on Friday 28th September. AFG will respond to the Commission’s call for submissions addressing the issues raised about the role of intermediaries.
It is important to remember the current Royal Commission was tasked with reviewing misconduct and by its very nature has highlighted those instances where conduct has fallen below community expectations. AFG has always maintained that the clear majority of mortgage brokers are small business operators with customer service at their core. Without the delivery of good consumer outcomes, no mortgage broker would have a sustainable business.
The erosion of public confidence in the major banks and their failure to meet community expectations is inextricably linked to the immense market power that they wield. We will be telling the Commission that any action taken to disadvantage the mortgage broking channel will impact Australia’s non-major lenders, consumers, the tens of thousands of small business people working as mortgage brokers, and risks handing more power to the major banks.
As Treasury noted in its submission to the Royal Commission, the balance of responsibility and interests must be carefully weighed. A model that is too prescriptive risks being commercially inefficient and have a negative effect on competition.
AFG will continue to work through the Combined Industry Forum (CIF) to implement the changes agreed upon to address potential conflicts of interest. The changes require a reasonable period to become embedded into the processes, procedures and culture of individual broker businesses and once that has occurred it will be an appropriate time to again review the extent to which community expectations are met and good consumer outcomes are achieved.
We will also be telling the Commission that the definition of a ‘good consumer outcome’ articulated by the CIF is an appropriate measure of ‘best interest’. The definition looks at the size and structure of the loan, affordability, responsible lending requirements and individual customer needs.
As always, I would encourage you all to continue to deliver the vital service and support you provide to your clients and AFG will continue to support you to do so. We will be meeting with government and regulators this month as we draft our response to the Commission and will share that with you when it is complete.