Mortgage brokers have not been through any major scandals akin to Storm or Westpoint as a result of low levels of risk related to mortgages and the application of professional standards within the mortgage broking sector.
This is due to the direction of the ‘money flow', according to the Mortgage and Finance Association of Australia (MFAA), where funds in financial advice move away from a consumer while those in a mortgage move towards a consumer,
The comments were made by the MFAA in a submission to the Parliamentary Joint Committee on Corporations and Financial Services inquiry into standards in financial services.
The MFAA stated "there is a considerable difference between the services provided by financial advisers and brokers" and "while the broker may make a recommendation or provide credit advice to the consumer, the decision to lend the money is made by the lender, which ‘owns' the money".
It added the transactions and risks were different and brokers were "required to take individual responsibility to ensure there is no consumer disadvantage and not simply disclose the conflict".
The MFAA stated that mortgage brokers did not provide a ‘financial service' as defined by the Financial Services Reform Act (FSRA) and were regulated under the National Consumer Credit Protection Act. As such it was not required to make comment about professional standards in the financial services sector but had done so in response to an invitation from the Committee Secretary to appear at the inquiry.
The MFAA said it had always been its policy to have higher internal regulatory and education standards than those imposed by legislation and had cancelled the membership of 2600 members between 2009 and 2013 who had not met higher education standards imposed by the association.
While the MFAA, which has about 10,700 members, has claimed mortgage broking sector has not undergone large scale scandals there have been a spate of submissions to the inquiry regarding no doc loans, low doc loans and problems with banks related to mortgages.
These echo similar sentiments aired by many consumers during the Senate Inquiry into the Performance of the Australian Securities and Investment Commission when 155 submissions of the 474 submitted were related to poor experiences with mortgages providers, brokers and banks.