The Australian Securities and Investments Commission (ASIC) has stepped around giving a direct answer to Parliamentary questioning about the banning of commissions in the mortgage broking space.
Answers to questions on notice posed to the regulator during hearing of the Joint Parliamentary Committee on Corporations and Financial Services revealed that ASIC is not prepared to venture a firm view on the removal of commissions from mortgage brokers – something which would place them on the same footing as financial planners.
The regulator was asked about its response to claims by the Finance Brokers Association that banning commissions for mortgage brokers may lead to brokers being driven out of business, a concentration of power in the banks and a rise in interest rates.
ASIC replied that as it had “not proposed that mortgage broker commissions be banned we have not undertaken detailed analysis about the impact such a ban would have.”
“We also note that the precise impact of any ban will depend on how it was framed, how the market and consumers respond, and any other regulatory changes that are made,” it said.
However, when asked whether the commission environment could be improved, the regulator pointed to its view that the current model “has the potential to encourage brokers to place consumers in larger loans, as commission amounts are generally calculated based on the size of the loan.”
“We have suggested that this risk could be reduced by changing the standard commission model so that brokers are not incentivised purely on the size of the loan,” it said.
ASIC said it also believed the industry “should move away from other bonus commissions and bonus payments: volume and campaign-based commissions and bonus payments to lenders' staff have the potential to contribute to poor consumer outcomes and may place smaller lenders at a competitive disadvantage.”
It said the industry should move away from soft dollar benefits, which were widespread, because these could encourage poor consumer outcomes and place smaller lenders at a disadvantage.