FBAA responds to the royal commission

FBAA responds to the royal commission | Insurance Business

FBAA responds to the royal commission

The Finance Brokers Association of Australia (FBAA) has lodged its response to the royal commission’s interim report, arguing against the need for further disclosure and backing the current remuneration structure.

“The association agrees with the commission’s interim report that improvements can be made, but we also agree that new laws or regulations aren’t necessarily the answer,” said Peter White, FBAA managing director.

On the issue of full disclosure of remuneration paid to broker by financiers, FBAA rejected any suggestion of a need for further disclosure.

“Already brokers have to provide lengthy disclosure documents, while the National Consumer Credit Protection Act 2010 (NCCPA) ensures clients are well-informed about the costs and commissions,” White said. “We don’t want brokers to be forced into even more documentary disclosure, and that view accords with ASIC’s findings that consumers can disengage because of information overload.”

FBAA was also of the view that the current broker remuneration structure is superior to other models and any change may be detrimental.

“We are concerned that a change to the existing structure without fully understanding the impact of any proposed model may simply disrupt a stable and important profession with no corresponding improvement,” White said. “The majority of misconduct has been due to market participants failing to follow existing laws. This shows that further reforms should not be contemplated until there is compliance with current laws.”

The broking body also disputed claims that lenders paying value-based upfront and trail commissions is a possible breach of the NCCPA.

“The relevant section does not prohibit conflicts of interest, only those causing disadvantage, yet the term ‘disadvantage’ is imperfect and can’t be relied on,” White said. “It’s our submission that the laws already in place strike an appropriate balance.”

The final report from the commission will be released on Feb. 1.