.jpg)
By
The Mortgage and Finance Association of Australia (MFAA) has published its submission to the Productivity Commission this week, with the organisation taking clear umbrage at fee-for-service payment models.
“The suggestion that mortgage brokers could be paid directly by the consumer via a fee-for-service model, in contrast with the commission model currently used that involves payment from lenders, does not fit with current regulatory thinking and remains highly inappropriate for the broker industry,” reads the association’s submission.
The submission also went on to detail the key problems with such a fee-for-service model, including that it would offer no correlation to the economic value brokers produce in the loans they originate and would not lead to overall savings for customers as bank price parity policies between their channels, and the demands of shareholders, mean it is unlikely to result in any reduction in interest rates to compensate for the increased cost to consumers.
The submission also stressed that a fee-for-service model would have a negative impact on competition and consumer outcomes because customers who typically cannot afford to pay an upfront fee, such as first home buyers, could be prevented from securing credit.
Similarly, customers accessing the broker channel would be charged a fee which would not be charged to those using branch or online direct channels, reducing the value of the broker proposition and forcing brokers to compete on unequal terms.
“The current standard commission structure is a reasonable remuneration model that supports a strong and competitive broking industry, and as demonstrated in the ASIC Report and the Sedgwick Review, has not been identified as driving systemic poor customer outcomes,” reads the submission.
