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CBA culls inactive mortgage brokers
The Australian 12:00am February 24, 2017
Michael Bennet
Commonwealth Bank, the nation’s biggest lender, has cut off mortgage brokers who aren’t providing enough business, drawing criticism from the industry.
In a note to some brokers this week, Sam Boer, CBA’s general manager: broker sales, advised them their accreditation with the bank was being removed because they had not been “active” for “some time”.
CBA was this month applauded by analysts and investors for reporting a drop in the proportion of mortgages flowing to the bank via brokers in comparison to branches, reducing commission expenses.
“We have identified that you have not been active with Commonwealth Bank for some time. Accordingly, we have made the decision to resign your accreditation with the Commonwealth Bank in accordance with our agreement with your head group,” Mr Boer said in the email to affected brokers.
“This means you will no longer be able to submit home loan applications to the Commonwealth Bank. Please be advised that effective immediately, we will not accept any new home loan applications from you.”
Brokers told The Australian “hundreds” — including from the nation’s biggest aggregator group AFG — had been culled after passing less than one mortgage to CBA in the past year.
They claimed CBA gave no notice of the decision and that it could distort competitive dynamics in the market.
The brokers, who declined to be named, added clients “wouldn’t be rapt” if they discovered brokers were justifying giving CBA a “couple more” loans to keep their accreditation and that lenders were typically judged based on their interest rates.
CBA is said to be the only bank rationing its network of inactive brokers. AFG didn’t respond to requests for comment.
John Flavell, the chief of Mortgage Choice, the second-biggest branded broker behind Aussie Home Loans, said consumers could perceive that brokers were pressured into giving CBA business regardless of whether it was the best deal.
But he conceded that for CBA, it may be prudent and more efficient to cull brokers who were less active and not familiar with the bank’s products and procedures. Mortgage Choice brokers were not being cut off by CBA, he added.
“From a consumer perspective (the perception) may be that it could unduly influence the business they give CBA,” he told The Australian. The timing coincides with the corporate regulator’s looming release of its review into brokers’ remuneration via commissions amid concerns they encourage miss-selling.
In a statement, a CBA spokesman said less active brokers were identified as part of an ongoing review of its products and services, which this week also included updating its terms for a raft of deposit accounts.
“We found applications submitted by these brokers often require more time and effort to review, to ensure they meet our regulatory obligations and standards. This can lead to significant delays in the process and a poor customer experience because these brokers are not familiar with our systems and processes,” he said.
For the half to December 31, CBA reported that 57 per cent of mortgage flows were originated via its proprietary network, up from 54 per cent.
UBS analyst Jonathan Mott said it was the first reduction in CBA’s reliance on brokers since 2012, which was “important from a profitability perspective (and) reduces risk, given evidence of systemic mortgage misrepresentation, particularly via the broker channel”.
CBA chief Ian Narev said: “The best response we can have is to make sure that our proprietary channels are as good and competitive as they possibly can be.”