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Banking Royal Commission

THE BANKING ROYAL COMMISSION

Well the Banking Royal Commission (BRC) its finally over and its recommendations were made public in the first week of February 2019.

There were 76 recommendations in the final submission to Government incorporating improvements in the operations of the financial sector as well as recommendations to increase criminal and financial penalties for misbehaviour.

Whilst most of the recommendations will have a positive impact the industry, the one single biggest negative impact has been the loss of trust the community now has the big banks, primarily the big 4.

What came out of the commission regarding everything from inappropriate to illegal activities stunned most people, including those working in the finance industry. 

We at Your Finance Group were in favour of the BRC from early 2017 but even we were stunned and disgusted at the activities of the big 4 that were brought out into the open.

Coming from a life time experience in finance including almost 25 years in banking, it is not believed that the profit before people culture in the big banks will turn around quickly. That sort of culture becomes so embedded in individuals’ mindsets that it could take a generation for that to be changed.

Having said that, there was one key recommendation in the BRC that really shocked the industry and we have an executive from one of the big 4 banks to thank !!

The recommendation was to have applicants not lenders pay brokers for their service.

This recommendation appears not to have been well thought through before it was added to the final BRC submission.

Let me explain.

Brokers focus on the clients needs, not the lenders profits. We spend considerable time sorting through a mass of loan products and pricing so a client can be informed to choose which product and lender they prefer.

The work involved with our clients to arrange their finance is substantial and becoming more time consuming as time goes on.

The paperwork alone to meet all government and lender legislation obligations is immense. Brokers do all the work a lenders staff would normally do including entering all the data into their computer, so all the lender assessor has to do is open a computer screen.

This work would normally be undertaken by lender staff at a high cost. It is for this reason the lenders pay the broker a commission. This model has worked well for almost 30 years.

However, one executive of a big 4 bank proposed to the BRC Commissioner that clients, YOU, should pay this fee.

The broker industry was outraged at this recommendation as it places a financial burden on clients and yet the big banks make more profit as they don’t pay staff or anyone to do all that work.

Forcing clients to pay a broker a fee would collapse the broker industry leaving clients, YOU, with the only real option of having to deal with mainly the big 4 banks as smaller lenders with no branches would be devastated.

The big banks should not be given a free kick that would boost their profits after such terrible disclosures in the BRC.

So the broker industry, that handles around 60% of all housing finance applications is fighting back and fighting back hard, very hard.

Thankfully now that the dust has started to settle after the release of the BRC recommendations, politicians are starting to realise the serious negative impact on home buyers of implementing a system where the client pays the broker a fee.

Events are still unravelling, and we will update you more of what is happening in the near future.

Meantime if you want to support the broker network in its fight to keep the lenders paying the broker fee, you can sign the petition at www.change.org and search the petition “Save the Mortgage Broking Industry”