FINDINGS of the Banking Royal Commission (The Royal COmmission into Misconduct in the Banking, Superannuation and Financial Services Industry) have now been released to much public interest.

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The Federal Government, despite previous strong opposition from within its own ranks, established the Commission on 30 November 2017.

Since then, there has been much speculation about what the recommendations would be, and as expected, the large banks were heavily criticised for their actions and attitudes.

A surprise to many though, including those in the industry, was key recommendations made about mortgage brokers, including:

Mortgage brokers will be required to act in the best interests of the borrower;

From 1 July 2020, trail commissions will be banned to avoid conflicts of interest between brokers and consumers as well as other lender-paid commissions on new loans; and An additional review to take place in three years to consider the removal of upfront commissions and to a borrower pays structure.

News Of The Area interviewed the owner and manager of Mortgage Choice Raymond Terrace, Ms Lauren Murphy to better understand the implications on small businesses like hers.

Beginning by discussing what some considered the surprise recommendations to mortgage brokers, Ms Murphy said, “There is no evidence that supports systemic poor outcomes for consumers by using the services of a Mortgage Broker so yes I think it is fair to say that I was shocked and indeed deeply disappointed with the findings.”

“I don’t believe there is any doubt who mortgage brokers work for, the consumer.”

This perspective seems to be supported with research, and a study commissioned by the Finance Brokers Association of Australia (FBAA) and reported in 2018 shows that 93% consumers agreed their broker had their interests at heart; 93.6% found their broker understood their needs, objectives and financial situation; and 94% were happy with their broker’s knowledge and competency.

Ms Murphy said that is the recommendations are enacted, it will have dire consequences for her business in that it will close.

She said, “I don’t think the full impact of that thought has hit me yet.”

“We are trying to remain positive ensure that all sides of government understand that implementing the findings of the commission will see the end to over 15,000 small business in Australia and remove competition and choice for consumers.”

Ms Murphy expressed concern about people paying upfront for a Broker, saying, “Borrowers in regional areas are already disadvantaged with access to funds because of lender’s policies, limited bank branch access and lower deposit amounts.”

“To impose yet another fee or cost is wrong and will only serve further disadvantage regional borrowers. I strongly reject a borrower pays system and will be joining my colleagues to advocate for consumers against this.”

One of the sticking points is trail commissions, and of this Murphy replied, “Banks made the decision over 20 years ago to split brokers’ payments to receive approximately half of the commission when a loan settles and the rest over the life over the loan to ensure we continue service we continue to service our clients needs.”

“Our clients are diverse and have differing levels of financial education, from first home buyers, upgraders to investors.”

“In my time as a mortgage broker the regulatory environment combined with access to funds has never been tougher, in my opinion borrowers have never needed our services more, and that is evident with 59.1% of Australian borrowers using the services of a mortgage broker to access funds for a home loan.”

“We aim to empower and educate all our clients about the loans they choose, the lender they choose and strategies and tools to repay debt as soon as possible.”

“A mortgage broker will have access to loans and lenders you may not of otherwise considered and represent choice for consumers.”

By Heather SHARP