The Commonwealth Bank (CBA) yesterday testified to the Royal Commission that its home loan commission structure was riddled with conflicts of interest, in an admission that the Financial Services Union (FSU) said showed the bank’s lack of customer care.
CBA senior executive Daniel Huggins admitted to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry that there were conflict of interest issues with its commission structure for home loans.
“The larger the loan, the larger the upfront commission. The longer the loan and the longer it takes to pay off, the larger the trailing commission and that is a conflict,” he told the inquiry.
The FSU said that it had known “well before” the Commission that “the banks were driven only by profit and that consumers were the losers.”
FSU national secretary, Julia Angrisano, said that customers would be “horrified” that brokers reaped financial benefit from locking them into larger loans for longer periods.
She said though, that the Commission offered a chance to ensure that such a scheme was not put into place again.
“The Royal Commission provides an opportunity to overhaul incentive schemes paid to bank employed mortgage lenders and the trailing commission model paid to third-party brokers,” Angrisano said.
“If we get this right we will go a long way towards rebuilding the trust and confidence of our community.”