Proposed regulation of the mortgage broking market could impose unnecessary costs on consumers and limit their choice of lenders if it is not planned carefully enough, according to Tower Australia chief executive Jim Minto.
Minto’s comments follow the Federal Treasury’s release earlier this week of a green paper on financial services regulation and credit reform, which included plans to regulate the mortgage broking industry.
Minto argued that heavy regulation would not be in consumers’ interest as it would limit their access to advice. He urged regulators to adopt a sensible and pragmatic approach to regulation and to be careful to avoid repeating “the errors made in the design of the FSR [Financial Services Reform] advice model, particularly around insurance and superannuation”.
“While we don’t disagree that some regulation in the interests of the consumer would be of benefit to the industry, we don’t want to see that regulation impose significant consumer costs on the industry or limit access to mortgage brokers. The principle in these matters is that the benefits of regulation must outweigh the costs to the consumer.”
He added that brokers generally provide what consumers need and want and cannot be blamed for the irresponsible lending practices of US-based institutions linked to the sub-prime crisis.