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Federal leadership on regulation of mortgage brokers needed.



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Media Release

SENATOR STEPHEN CONROY ALAN GRIFFIN MP DEPUTY LEADER OF THE OPPOSITION IN THE SENATE SHADOW MINISTER FOR CONSUMER AFFAIRS SHADOW MINISTER FOR FINANCIAL SERVICES

5 April 2004

EMBARGOED UNTIL 12 AM 6 APRIL 2004

FEDERAL LEADERSHIP ON REGULATION OF MORTGAGE BROKERS NEEDED

Today’s report in CHOICE Money & Rights magazine on mortgage brokers highlights real concerns about some sharp practices in this industry and the pitfalls that some consumers could face when dealing with mortgage brokers.

The CHOICE investigation, which included 42 shadow shopping surveys, showed that 16 of the 42 mortgage brokers surveyed (38%) did not provide adequate consumer information. Given the increasing reliance by lenders on brokers, more and more consumers are relying on brokers for advice. Unfortunately, the advice provided by brokers is deficient in many cases.

For example, the investigation identified the following deficiencies:

ƒ claims of finding consumers the best loans - even though the brokers were not able to sell many highly rated products; ƒ claims that the broker is independent - without disclosing the large commissions paid by banks to get on the brokers’ list of recommended products; ƒ insufficient information about the costs of refinancing a home loan; and ƒ poor commission disclosure.

The report also warned borrowers to beware of pressurised sales and exorbitant fees.

The conduct of some mortgage brokers is an ongoing issue. Labor raised this issue over 12 months ago after a report was released on the finance and mortgage broking industry by the Consumer Credit Legal Centre (NSW) that showed that the regulatory system was failing consumers.

The Howard Government has, so far, failed to act on these concerns. Some States have taken action to address the problems. However, a patchwork quilt of regulation applying to the mortgage broking industry is not in consumers best interests.

Labor believes that national leadership is required on this issue to ensure that a rigorous, comprehensive and uniform regulatory regime for brokers is established to protect consumers. Labor will work with the States and Territories to achieve this outcome.

For further information please contact: Alan Griffin: 0419 353 476

Amber Hawkins (Senator Conroy’s Office): 0407 434 523