Pannek warns of ‘longstanding concerns regarding the risks that can emerge in large-scale paid lender referral programs’
Australia’s peak broking association has weighed in on the ongoing controversy surrounding Commonwealth Bank’s home loan introducer program.
Earlier this week, it was revealed that CBA has identified possible compliance issues and potential fraud within its introducer program.
Under the program, CBA pays third parties such as real estate agents, accountants and other professionals a commission if they refer a client to the bank. The commission is only paid if a home loan is successfully generated.
It is unclear what these compliance and possible fraud failings are, but a CBA spokesperson told the AFR on Thursday: “Rogue actors are perpetually attempting to defraud banks and their customers. Their methods and techniques are well known, as well as seeking to take advantage of constant technological change.
“In recent years, we’ve noticed higher levels of attempted fraud across the industry, and we expect that to continue. Like every other financial institution, we are constantly investigating suspected instances of fraud.”
The Australian Securities and Investments Commission (ASIC) has investigated similar programs in the past.
In 2021, it commenced proceedings against ANZ over its home loan introducer program, alleging that the bank “breached consumer protection credit laws by accepting customer information and documents from introducers and other unlicensed individuals when this was not allowed”.
ASIC warned of a prevalence of false consumer information in these introducer programs, which may lead consumers to take larger loans than they can afford.
Anja Pannek (pictured), chief executive of the Mortgage and Finance Association of Australia (MFAA), said these developments “highlight longstanding concerns regarding the risks that can emerge in large-scale paid lender referral programs”.
The financial incentive of these programs deserve scrutiny, said Pannek.
She also criticised the lack of regulatory guardrails governing these sorts of introducer programs. In contrast, Pannek highlighted the high level of consumer protections inherent in the mortgage broking industry.
“Mortgage brokers operate within a comprehensive regulatory framework that includes strict licensing requirements, the best interests duty, regulated remuneration arrangements, education and professional standards, and mandatory membership of the Australian Financial Complaints Authority,” said Pannek.
Pannek noted that referrers are not permitted to provide credit assistance and are generally limited to passing on customer contact details yet may receive commissions if a loan proceeds.
“Mortgage brokers are one of the most highly regulated distribution channels in consumer lending. This framework exists to protect consumers and maintain confidence in the system,” Pannek added.
CBA states that “prospective referral sources must operate in an industry which supports the distribution of mortgage lending and be a current member of an acceptable professional body and in some cases, hold an applicable licence to operate their business”.
It accepts referrals from accountants, solicitors, lawyers, conveyancers, real estate agents and financial planners.
