LEGAL By Jonathan Flaws
Aussie Report Card or finger in the dyke
A positive interpretation of the Hayne's report – it's not all bad news for brokers.
I
t’s always interesting reading your children’s report card from school. Normally its relatively brief and gives a snapshot of what the teachers and headmaster think of your child’s performance. It is something to read with interest and encourage your child to respond positively and either do better or keep up the good work. Although the Hon Kenneth Hayne AC QC delivered a 495-page review on misconduct in the Banking, Superannuation and Financial Services Industry only 21 pages were devoted to comments and recommendations on intermediated home lending. To read the response of brokers in the Australian media you could be forgiven for thinking this would be the end of the industry – they would have to either get out or stay in and go broke. Maybe I am blinded by the fact that Haynes is a well-respected commercial lawyer who sat on the High Court and is
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generally regarded as knowing what he is talking about; maybe it’s because I am sitting on the other side of the ditch and reading the report without being entrenched on the side of Australian brokers; maybe it’s because I suggested some years ago that to survive, brokers would have to consider themselves as professionals and receive a fee for service from clients rather than a sales commission; but I think if the report is approached like a school report card it has some positives that will make the mortgage broking industry sustainable in the long term and keep brokers profitable. The title suggests there is a flood of misconduct and the credit code dyke, built by the federal legislators to hold back the flood, has holes looking for fingers. At page 77 of the report, Haynes uses a similar Dutch reference to justify his suggested changes. “Changes of the kind that I have described
above were introduced in the Netherlands in 2013. The mortgage broking industry continued without significant adverse consequences to its own operations, the market generally or individual participants. Mortgage brokers offered different remuneration arrangements including charging an hourly rate for advice and flat fees. Furthermore, to ‘create a level playing field’ between direct and intermediated lending, lenders were required to identify their costs of providing advice and other services to borrowers who did not use a broker and expressly charge a fee to recover those costs from those borrowers.” The Dutch have already placed a finger in the dyke. What he is saying is that what he is recommending has been tried elsewhere and has worked. His last comment is something that brokers should take to heart because he is suggesting that direct lenders
