MFAA insists advisers should bear levy burden

The mortgage broking industry – facing a levy of under $2 million, a fraction of the burden imposed on advisers – has again objected to being drawn into covering the additional $50 million allocated to advice above the sector cap.

In its submission to Treasury, the Mortgage and Finance Association of Australia (MFAA) argued that given so few claims are linked to this subsector, extending a special levy to mortgage and finance brokers would be inconsistent with the principles of the scheme.

“Brokers continue to deliver strong consumer outcomes, low complaint volumes, and high compliance with AFCA determinations. Based on current estimates, no claims from this subsector are expected for the relevant period – in fact it is the only subsector that has no anticipated claims,” the MFAA said.

The body noted that brokers, as small business operators, already contribute to the Compensation Scheme of Last Resort (CSLR) through the annual levy, as well as ASIC levies, AFCA fees and professional indemnity insurance, however, these costs are also borne by advisers.

It warned that “to impose special levies that cross-subsidise unrelated subsectors would create an inequitable and unsustainable burden on an otherwise low-risk, high-performing sector”.

The MFAA urged the minister to reject subsector size, retail-facing status and capacity to pay as “proxies for actual responsibility”.

It argued that holding the responsible subsector to account would create incentives to “lift their own standards and prevent future consumer harm”.

“The CSLR was designed as a narrow, prospective safety net, not as a mechanism for broad-based cost transfer between subsectors. Preserving this principle is essential to its sustainability and integrity,” the MFAA said.

“We therefore urge Treasury to ensure that any special levy arrangements remain consistent with the scheme’s original intent and do not impose unfair or disproportionate burdens on credit intermediaries.”

The MFAA has previously raised the same concerns, warning earlier this year that the CSLR’s structure spreads losses caused by one subsector across others, creating an imbalance between responsibility for misconduct and the costs borne by the wider industry.

“Ministerial discretion should not set a precedent that increases cross-subsidisation or removes the incentive for high-risk sectors to improve standards and prevent future consumer harm,” it said at the time.

In its submission to the inquiry into the collapse of Dixon Advisory and its impact on the CSLR last year, the MFAA also argued that it would be unfair for mortgage brokers to get slugged for complaints that have nothing to do with the credit intermediary subsector.

Responding to these concerns last year, Financial Advice Association Australia (FAAA) CEO Sarah Abood said the sentiment seems “a little self-interested”.

“The thing that I’m raising an eyebrow at is some of the submissions saying that amounts over the cap shouldn’t be shared more broadly,” Abood said at a media briefing during the FAAA Congress in November.

“I’m not sure on what basis there’s a view that we ought to be bearing that additional cost.”