The Banking Royal Commission
Did you know that there was a Royal Commission into the banking and insurance industries? If you haven’t can you please send us the address of the rock you are living under, because we want to come live with you.
If you have it seems that finance brokers are an evil bunch. Brokers charge huge upfront fees and don’t deliver loans. Brokers get their clients into huge loans that the consumer has no hope of servicing. True or False? Well, for Regional Finance Solutions at least I am calling a resounding ‘False’. Why?
Huge upfront fees – at Regional Finance Solutions we don’t charge our clients fees unless it’s an exceptional circumstance. And even then, our agreements are totally clear – if we do not get a loan approved in line with our agreement 100% of the fee is refunded to the client when the loan is drawn down.
Huge loans that cannot be serviced – this one always gives me a chuckle. Brokers don’t approve loans, the banks do. Brokers introduce the client to the bank and provide the bank with all the supporting documents that they require. Brokers are provided with lenders guidelines and we ensure that the requirements are met, simple (this is separate to the advice, support, guidance, ands all the other things we do for our clients).
How many clients do we have where their loans are in arrears? 3, yes that’s right – 3 out of over 1,000 clients. We are not over committing our clients.
When will the enquiry and reports be completed and action taken? Probably in February or March 2019. By the time the report is handed down there will be a Federal election pending so nothing will happen, then when the new government is elected there will be the settling in period, the report read, experts brought in to analyse it, recommendations made and so on. We don’t think that the report will see the true light of day until the third quarter of 2019.
At the moment there is lots of uncertainty within the banking industry. Recently APRA took Westpac to task on breaches of Responsible Lending under the National Consumer Credit Protection Act. Westpac agreed, and they went off to Court with an agreed fine. The problem is that when they went to Court the Judge disagreed and commented that he thought Westpac had committed no breach, so he has reserved judgement for now. Lenders are nervous and over analysing things, double and triple checking, doubting their policies that have been in place for decades – and policies that have served them and the market well.
As a result, the housing market is slowing, values are going down, consumers are finding it harder to get loans that they would normally be approved for. And how long will this continue for? Well, we think until at least after quarter 3 in 2019, and then what? Well that’s a story for another day.
All of this leads to finance brokers being more important than ever. Brokers are highly trained and skilled in navigating the lending landscape – even if that landscape is moving regularly. Brokers know where to place your loan so it is to your best advantage. And the good brokers; if they can’t do a deal for you they will give you guidance on how to achieve what you want to achieve.
And the Royal Commission. Yes, it turned up some bad eggs in this industry. Some of them may face charges – fines or possibly prison time, others may be pushed out of the industry. How do we feel about that? Bloody good, let’s get the bad eggs out and let the professionals restore faith and trust in our game.