Mandatory MFAA membership cleared

A group of mortgage brokers that require their loan writers to be members of the Mortgage & Finance Association of Australia will be allowed to continue with this arrangement.

The Australian Competition and Consumer Commission issued a statement on Friday saying it will protect Mortgage Choice, Aussie Home Loans, ING Direct and Virgin Money from legal action over their exclusive dealings with the MFAA.

Mortgage Choice, Aussie Home Loans and Virgin Money require mortgage brokers and financial planners to be members of the MFAA as a condition of doing business with them.

ING Direct has a slightly different arrangement - it requires that brokers and planners undertake training with the MFAA.

Back in 2007 and 2008, the institutions lodged exclusive dealing notifications with the ACCC, which provides them with protection from legal action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act.

There is potential for consumer detriment in situations where businesses engage in third-line forcing - requiring a consumer or business partner to buy one product as a condition of having another.

The arrangement also restricts the choice of professional association for brokers working with these groups.

Last November, the ACCC wrote to the MFAA advising it that it would review the notifications. The ACCC asked the parties to comment on whether the balance of public benefits and detriments arising from the notification had changed as a result of credit licensing under the National Consumer Credit Protection Act.

The MFAA argued in its submission to the ACCC that there was still public benefit in these relationships because the standards imposed on its members were "significantly higher than those imposed on mortgage brokers under legislation."

"The MFAA regime covers many ethical, educational and professional issues that the NCCP does not and will not cover. It provides a much higher level of consumer protection than the NCCP."

The ACCC accepted this argument. It said in its statement that: "The MFAA's membership requirements impose higher educational and certain other professional standards on its members than the regulatory regime.

"The ACCC considers requiring MFAA membership is likely to assist lending businesses to ensure that their brokers are of a consistent high standard and to meet their compliance obligations under the National Consumer Credit Protection Act."