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The introduction of fees for service would cause “major disruption” in the finance industry as it provides a “clear disincentive” for consumers to use such professionals, according to the Australian Finance Group (AFG).
Only the four major banks would be the beneficiaries of this move, AFG said in its commentary of the Productivity Commission’s Draft Report on Competition in the Australian Financial System. “[T]hey would gain an additional competitive advantage over competing lenders that do not have extensive direct distribution channels,” AFG said.
If anything this would “further entrench the oligopoly powers” of the major banks. Coupled with T Commission’s observations concerning the regulatory advantage of D-SIBs, the move would lead to less competition in the sector, as well as a loss of p ricing benefits, the brokers group predicted.
The group mentioned an interim report recently released by the Australian Competition & Consumer Commission (ACCC), which found “opaque” pricing of discounts among lenders.
“The discounting by the big banks lacks transparency and it’s almost impossible for customers to obtain accurate interest rate comparisons without investing a great deal of time and effort. But the potential savings from these discounts are immense,” ACCC Chairman Rod Sims said in a statement.
For the AFG, the presence of the mortgage broking channel is “one of the few drivers of competitive tension” in lending market. “A consumer dealing directly with a lender has limited negotiating power or knowledge of the interest rates and lending criteria offered by competitors. A mortgage broker with access to a panel of lenders drives competition between lenders to the benefit of all consumers, not just their own clients,” it added.
