The major banks have agreed that an appropriately crafted best interests duty for brokers, different to that applied to financial advisers, could help preserve the integrity of the third-party channel according to Australia\u2019s leading magazine for mortgage brokers, The Adviser.<\/p>\n
In their responses to the Hayne royal commission\u2019s interim report, ANZ Bank, Commonwealth Bank (CBA), National Australia Bank (NAB) and Westpac have agreed that the introduction of a best interests duty for mortgage brokers could improve customer outcomes.<\/p>\n
CBA<\/p>\n
Commonwealth Bank suggested in its submission that the best interests duty go beyond the current obligation to conduct an \u201cunsuitability\u201d assessment and take into consideration the products (including all their features) that mortgage brokers have available to them to ensure that \u201cany duty appropriately defined is fit for its purpose\u201d.<\/p>\n
The major bank is opposed to such a duty being extended to lenders as they are limited to supplying their own products.<\/p>\n
\u201cLenders are not customers\u2019 agents nor regarded by customers as their agents, and it would not be appropriate to extend the same duties to them,\u201d CBA stated in its submission.<\/p>\n
According to Commonwealth Bank, a mortgage broker\u2019s duties are:
\n\u2022 To act efficiently, honestly and fairly as stipulated in the National Consumer Credit Protection Act 2009.
\n\u2022 To undertake an \u201cunsuitability assessment\u201d, which involves making \u201creasonable inquiries about the consumer\u2019s requirements and objectives in relation to the credit contract and make reasonable inquiries about, and take reasonable steps to verify, the consumer\u2019s financial situation\u201d.
\n\u2022 To have \u201cadequate arrangements\u201d in place to ensure customers are not disadvantaged by any conflict of interest.
\n\u2022 To establish a contract with the customer where there is an \u201cimplied warranty that their services will be provided with due care and skill\u201d.<\/p>\n
NAB<\/p>\n
NAB noted in its own submission that a \u201ccustomer first duty\u201d for the mortgage broking industry has already been crafted by the Combined Industry Forum (CIF), which it believes \u201cestablishes a positive, objective, measurable test and, if appropriately applied, will result in an outcome that is in the interests of the customer\u201d.<\/p>\n
It additionally pointed out that the customer first duty incorporates a \u201cgood customer outcome\u201d definition that would hold the mortgage broking industry to a higher obligation than the current \u201cnot unsuitable\u201d obligation.<\/p>\n
The definition includes that the loan is of appropriate size and structure, meets the customer\u2019s requirements and objectives, affordable for the customer, and applied for in compliance with responsive lending requirements.<\/p>\n
Key risk indicators will be applied to the data.<\/p>\n
Westpac<\/p>\n
While Westpac executives repeatedly expressed the bank\u2019s preference for the proprietary channel in Productivity Commission and royal commission hearings throughout the year, the major bank\u2019s response to the interim report acknowledged that it is \u201cin customers\u2019 interests that brokers remain a viable channel, as it has been recognised that a large number of Australians value brokers as a means of accessing finance\u201d.<\/p>\n
Westpac is explicitly against the introduction of a best interests duty for brokers similar to the one imposed on financial advisers, as it is \u201cunnecessary and likely to be problematic in practice\u201d, and believes that existing obligations and the revised Code of Banking Practice likely sufficiently outline the duties that intermediaries owe to customers.<\/p>\n
ANZ<\/p>\n
ANZ Bank stated in its submission that it believes that a best interests duty, like the customer first duty proposed by the CIF, should be fit for purpose for mortgage intermediaries, promote competition, provide transparency, and promote \u201csimple\u201d and \u201cachievable\u201d solutions.<\/p>\n
But unlike NAB, ANZ supports the imposition of a \u201crelated duty\u201d on aggregators.<\/p>\n
\u201cAs with mortgage broker duties, ANZ considers that aggregator duties ought to be codified in a similar instrument,\u201d the major bank stated in its royal commission response.<\/p>\n
It further noted that aggregators are relied on by lenders to assist in the governance and oversight of mortgage brokers, and called for a consistent approach to such governance and oversight regardless of the broker\u2019s credit licensing status.<\/p>\n","protected":false},"excerpt":{"rendered":"
The major banks have agreed that an appropriately crafted best interests duty for brokers, different to that applied to financial advisers, could help preserve the integrity of the third-party channel according to Australia\u2019s leading magazine for mortgage brokers, The Adviser. In their responses to the Hayne royal commission\u2019s interim report, ANZ Bank, Commonwealth Bank (CBA), […]<\/p>\n