Australian Property News

Fee for service a disaster for consumers

Posted on Tuesday, January 11 2011 at 5:30 PM

Mortgage broker company the Australian Finance Group (AFG) has hit out at the implementation of the National Consumer Credit Protection (NCCP) Act, claiming it would be disastrous for consumers.

Under the changes, the Act would enforce a fee-for-service model for brokers.

"Firstly, it would require customers to pay service fees to get advice from brokers," AFG says.

"By forcing buyers into the arms of lenders who have a vested interest in selling from a limited product range, it is inevitable that consumer interests would be seriously undermined."

The AFG also believes the move away from brokers would have significant unintended consequences. The AFG says broker numbers would dramatically decline.

"Given the importance of brokers to non-major lenders, their market share would also significantly reduce, ramping up the big four market share back to levels above 90 per cent. This reversal of competition would be an additional blow to consumer choice."

The AFG claims with less competition, remaining lenders would have far less incentive to restrain future interest rate rises.

AFG's general manager for sales and operations Mark Hewitt says it's time to stop treating 'commission' as a dirty word, or using it to motivate politicians or public opinion.

"Our industry does a wonderful job for Australian consumers and uninformed speculation on this issue is dangerous," he says.

"When you consider the productivity of commission-based brokers, versus lender branch networks, it couldn't be clearer which offers the most cost effective distribution channel, and which offers more consumer choice, service and convenience."