The Mortgage & Finance Association of Australia (MFAA) has issued a response to the recent review by the House of Representatives Standing Economics Committee regarding the practices of Australia's four major banks in 2023-24.
The Economics Committee’s report expressed apprehension over the “resurgence of remuneration practices that may create inappropriate incentives that could result in inappropriate conduct and worse outcomes for consumers.”
The committee specifically noted that “major Australian banks have increased or are considering increasing the maximum variable bonus caps for lenders, undermining past progress on this issue – to the chagrin of the relevant regulator.”
The report has spurred a call for the Australian Banking Association to engage in discussions with non-bank lenders about implementing self-regulation to address these concerns.
MFAA CEO Anja Pannek (pictured above) strongly critiqued the banks’ justifications for these changes, particularly their argument that competing with brokers necessitated such adjustments.
“Stepping away from self-regulation as we have seen sets a worrying precedent,” Pannek said. “And justifying this change to have to compete against brokers is questionable at best. Banks compete against other banks, not brokers.”
The MFAA chief stressed the stringent regulatory environment that mortgage brokers operate within, which includes obligations such as responsible lending, the mortgage broker best interests duty, and anti-conflicted remuneration measures.
These regulations ensure that consumer protections remain robust, contrasting sharply with the more lax approaches seen in some banking practices.
Highlighting the effectiveness of the mortgage broking sector, Pannek pointed out that brokers are now responsible for facilitating 75% of all new residential home loans in Australia.
She also noted the exceptionally low volume of complaints related to mortgage brokers reported to the Australian Financial Complaints Authority (AFCA) – less than 1% of all complaints.
MFAA believes that the issue of bank staff remuneration requires careful oversight to prevent potential consumer harm.
“We believe that the self-regulation of banker remuneration, as outlined in the Sedgwick Review, warrants careful consideration by the ABA and banks,” Pannek said.
The association advocates for maintaining strict regulatory standards to ensure that consumer trust in the financial system remains unshaken.
Recently, MFAA urged NSW Parliament to prevent extending payroll tax obligations to brokers and aggregators, warning of severe impacts on the sector.
