Despite protests, broking industry to cross-subsidise other sectors’ financial failures
Members of the mortgage broking community have made their voices heard after being told to cough up for the $47.3 million Compensation Scheme of Last Resort (CSLR) expected shortfall for the 2026 financial year.
This Wednesday, Assistant Treasurer and Minister for Financial Services Daniel Mulino announced a ‘special levy’ on all retail-facing financial services sectors – which includes mortgage brokers – to address the shortfall.
The CSLR is an industry-funded scheme to compensate victims of financial misconduct. A substantial shortfall was declared in November, leading the government to think up ways to cover costs.
Mulino’s announcement comes despite protests from the Mortgage and Finance Association of Australia (MFAA) and the Finance Brokers Association of Australia (FBAA), which have argued that brokers shouldn’t have to split the bill due to failings from other sectors.
While the broking industry will only be expected to cover a small fraction of the shortfall, congruent with the negligible number of claims filed against mortgage brokers, MFAA chief executive Anja Pannek (pictured left) called it “an additional cost burden for our members and the industry”.
It is understood that credit intermediaries will be expected to cover less than 10% of the shortfall, but at the time of writing, the CSLR had not given a more granular breakdown of the levy distribution within this sub-sector.
“We acknowledge the Minister’s transparency in today’s roundtable and welcome the broader reform program he outlined to improve the long-term sustainability of the CSLR,” Pannek continued.
“The sheer magnitude of the levy, not only in FY26, but also what has been flagged for FY27, highlights how critical it is that steps be taken to address the root cause of misconduct.
“We remain firm in our position: mortgage and finance brokers, who have one of the lowest levels of misconduct across the financial system, should not be required to cross-subsidise compensation for failures occurring entirely outside the credit intermediaries sub-sector in perpetuity.”
At the individual level, the levy is expected to cost somewhere between $7 and $50 per registered broker (pending further details of CSLR’s calculations), but the nominal amount misses the point, according to FBAA managing director Peter White (pictured right).
It's the principle that underlines this and the precedent it creates, which is fundamentally wrong,” White told MPA.
White noted that the $47.3 million shortfall is based on current estimates modelling, but with a precedent now set, “what happens next?”
“Any increase (to the CSLR levy) is wrong, it shouldn’t happen, it’s not our fault,” said White. “It should be purely borne by those that caused the problem… it’s simply not the credit sector’s problem, so why is it bearing one cent of this?”
White called on the scheme to publish a breakdown of the expected levy costs for credit intermediary sub-sectors.
