Treasurer Josh Frydenberg is moving to implement some of the Hayne royal commission recommendations for mortgage brokers, targeting best-interest duties and bonus commissions.
The Treasurer has released draft laws that will make it illegal for brokers not to act in the best interests of their clients.
Mr Frydenberg’s legislation will also require the value of upfront commissions be linked to the amount drawn down by borrowers instead of the loan amount, and there will be bans on campaign and volume-based commissions.
“Mortgage brokers play an important role in promoting good consumer outcomes and competition in the home loan market, accounting for close to 60 per cent of home loans,” Treasurer Frydenberg told Australian Financial Review.
“The implementation of the best-interests duty will bring the law in line with what consumers expect of mortgage brokers.”
The Hayne royal commission recommended that mortgage brokers should be made to act in the best interests of customers and should be subject to civil penalties if they fail to do so.
The Council of Financial Regulators and the Australian Competition and Consumer Commission will review the way brokers get paid in three years, including upfront and trailing commissions.
“The government’s actions will deliver better outcomes for consumers, while continuing to promote competition,” Mr Frydenberg told AFR.
“The government is taking action on all 76 recommendations contained in the final report of the royal commission and will continue to take the necessary steps to restore trust in Australia’s financial system.”