Mortgage brokers don’t always obtain better-priced loans for their clients, and they don’t always offer them a diverse range of loan options, according to a joint submission from four consumer groups to The Treasury.
The submission – written by Choice, Financial Rights Legal Centre, Consumer Action Law Centre, and Financial Counselling Australia – centres on the Australian Securities and Investments Commission’s (ASIC) industry-wide review of mortgage broker remuneration. The submission also made a number of suggestions outside of the six proposals initially presented by ASIC.
One key call to action involves boosting standards across the industry, noting that some clients fail to receive the service they expect when consulting brokers.
“Advertisements for brokers claim that they will find customers the right loan, provide tailored advice or get a great loan for the client. However, their actual obligation to clients is quite low – brokers are only required to provide credit assistance that is [not necessarily suitable] for the consumer,” the groups said.
The consumer groups pointed to findings in the original ASIC report, which revealed that:
- The difference in interest rates between proprietary and third-party channels is small, with the direct channel sometimes being cheaper
- Individual broker businesses send 80% of their loans to four “preferred” lenders, with these lenders differing across brokerages
“Given the trust consumers place in brokers, they should all be held to a higher standard than arranging a ‘not unsuitable’ loan for their customers. They should be required to act in the best interests of their customers,” the groups said.