The peer-to-peer lender has called out banks for enforcing targets for mortgage brokers, putting pressure on advisers to place certain levels of business or face losing their accreditation. It believes the targets are not in the best interest of customers.
Terry Butler (pictured), acting CEO at Southern Cross, said: "Mortgage advisers’ commissions are not the problem and should be left well alone; it’s bank enforced targets put on mortgage brokers that are the issue."
Butler wants Commerce and Consumer Affairs Minister Kris Faafoi to "scrutinise the performance targets that some banks put on mortgage advisers – many of them border on coercive". Butler added: "If a broker hasn’t put a certain volume of business through a particular bank, the bank cuts them out – that’s the problem."
The comments come as Faafoi is poised to launch a consultation document in May that will scrutinise commission paid by lenders and insurers to advisers.
Butler warns changes to adviser commission could "concentrate more power in the hands of banks". Butler supports a more "uniform commission structure" for mortgage advisers.
The call to focus on bank targets was echoed by Andrew Scott, the general manager of Newpark Home Loans.
Scott said bank targets were not in the best interest of consumers and caused unnecessary upheaval. "Targets are skewing behaviours. Forcing advisers to place a certain number of deals or cancelling their accreditation, it is leaving brokers powerless," he said.
"The behaviours are inconsistent with regulatory reforms we're seeing across the finance industry. Lots of brokers have legitimate reasons for not hitting targets, such as illness, personal circumstances, or going part-time," Scott added.
Scott wants regulators to look at lender behaviour, as scrutiny on the finance industry continues following Australia's Royal Commission. Scott called bank targets "behaviour from a bygone era". He added: "The market has moved on. This sort of behaviour is also counter-productive for the banks."