An aggregator has “raised the bar on transparency” through introducing a new standard to its broker network which summarises crucial mortgage information in a consumer-friendly format.
Australian Finance Group (AFG) now requires both the customer and the mortgage broker to approve a simple one-page summary that clearly explains why the selected home loan product is appropriate for the customer.
According to AFG CEO David Bailey, the update not only positions the group to meet the impending best interests duty head on, but also serves as a response to ASIC’s challenging the mortgage broking sector to detail their process objectively and transparently so customers clearly understand their options and how they were selected.
Bailey explained, “To demonstrate that we are meeting the best interests test, rather than just complying with the new law when it comes in next year, we are taking proactive steps to demonstrate to customers that they have always been, and remain, the number one priority.
“We are lifting our disclosure obligation to customers and this information is presented in a way that is easy for customers to understand. It eliminates the need to scour reams of pages looking for the detail.
“AFG is not waiting for others to set our agenda. If it’s in the best interests of customers, then we should be doing it today. That’s how the mortgage broker business model works.”
The one-page document will record the customer’s requirements and objectives, list the products considered, explain the final recommended product, and unpack why it was selected and any remuneration to be paid by the lender.
It will be included at the top of the existing AFG National Consumer Credit Protection documents.
“The reality is the new obligations under the proposed best interests duty don’t come as a surprise to most mortgage brokers,” said Bailey.
“A mortgage broker’s business is entirely dependent upon their relationships with customers. Without good customer service a customer will not return to their mortgage broker and they will not refer friends or family. A mortgage broker’s business is built on fostering long-term relationships. In the main, mortgage brokers are small businesses focused on looking after their customer in the hope that word of mouth will open up new opportunities.”
Last year, one in every 11 home loans in Australia was arranged through AFG’s national network of 3,000 brokers – resulting in more than $31bn in settlements over the year.
“Now that AFG has lifted the bar to further demonstrate our customers are first and foremost, we are looking forward to working with ASIC and the rest of the industry on a regulatory guide to formalise the framework for the best interests duty,” Bailey concluded.
