Mortgage brokers plead for mercy in bid to keep trailing commissions

Mortgage brokers hope to convince both sides of politics to back away from a ban on trailing commissions.

Chris Bowen, with Labor candidate for the seat of Higgins Josh Spiegel, at a press conference in Melbourne yesterday. Picture: AAP

Mortgage brokers have backed the government’s “measured and realistic” response to the banking royal commission over Labor’s approach, but still hope to convince both sides to back away from a ban on trailing commissions.

As opposition treasury spokesman Chris Bowen declared Labor would “proceed with caution” on reforming the sector, Mortgage and Finance Association of Australia chief executive Mike Felton said the industry hoped to persuade both sides of politics not to make major changes to the industry.

Both the Coalition and Labor have pledged to stamp out trailing commissions for mortgage brokers, while Labor has committed to going further by forcing customers rather than lenders to pay the broker’s fee.

“The government has recognised the downside of customer pays (model) and they are not suggesting that is what should be implemented,” Mr Felton said.

“The government have had a more measured and realistic response in our view which we greatly appreciate.”

Josh Frydenberg took to social media yesterday to attack Bill Shorten’s in-principle support for the crackdown on mortgage brokers, and demand Labor’s full response to the report.

“You’ve now had three days to consider Commissioner Hayne’s final report. Where is your response?” the Treasurer said.

But the opposition’s treasury spokesman said Labor agreed with RBA governor Philip Lowe, who urged politicians to “be cautious” about rushing to make borrowers pay for mortgage broking services.

“The royal commission recommendation is itself one which says it should be implemented over a period of time and with caution and that’s certainly what we will do in close consultation with all involved; mortgage brokers, consumer groups, everyone,” Mr Bowen said.

The government said it would agree to abolish trailing commissions in July 2020 and review the reforms in three years. But it has refused to embrace a ban on other commissions — such as upfront payments from lenders to brokers and a switch to a consumer-pays policy such as that used in the Netherlands.

Mr Fenton said the industry still hoped to retain trailing commissions.

“While we differ on the issue of trail and we would like to have significant further discussions on that … we are happy to have those discussions and work with policy makers to come up with a solution,” he said.

A survey last month found just 3.5 per cent of customers would be prepared to pay the average $2000 broker fee themselves, leading to predictions of a “massive rationalisation” of the industry.

The MFAA has launched an advertising blitz warning the royal commission proposals would be bad for consumers and a huge leg-up for big banks.

Mr Felton said he had not met Mr Frydenberg or his Labor shadow Mr Bowen since the report was released on Monday, but the industry lobbies politicians from both sides to press its case against the reforms.

Mr Frydenberg yesterday launched a review of financial counselling funding, acknowledging inconsistent and piecemeal resourcing of agencies.

The Treasurer said while there was no specific recommendation to look at the funding of financial counselling services, the government “recognises that it is a vital service used by thousands of Australians every year”.

The opposition finance spokesman Jim Chalmers yesterday accused Prime Minister Scott Morrison of “running a protection racket for the big banks” in refusing to hold extra sitting weeks of parliament next month to take ­action on the royal commission recommendations.

Mr Chalmers said a range of measures could be passed in the proposed extra two sitting weeks, including cracking down on the grandfathering of commissions and banning the “hawking” of superannuation and insurance.