NATION Banks deal in secrecy

A HOME and business loan market dominated by major banks is hurting families and disadvantaging small businesses by leaving them in the dark about how much they actually pay.

A long- awaited Productivity Commission report to be released today recommends the corporate regulators force mortgage brokers to disclose their commissions and conflicts of interest on every loan being made.

In a sharp rebuke to the country’s biggest banks, already under pressure with the royal commission into misconduct in the industry to start hearings next week, the review says a dizzying array of products is confusing customers.

There are 4000 home loan products and 250 credit cards with “sometimes only marginal differences”, the review warns. In the insurance industry, four of the largest companies have more than 30 brands between them.

And credit card surcharges should be abolished because there is “little genuine commercial justification” for them.

Treasurer Scott Morrison said the Government had already handed regulators more powers as well as put in place the bank tax which was “evening up the playing field for smaller banks”.

“We are committed to ensuring Australia’s financial system is competitive and innovative,” he said.

Productivity Commission chair Peter Harris said the published interest rate usually did not reflect the real rate, and a lack of legal obligation by brokers often meant customers were left in the dark about better deals.

“And lender- owned aggregators and the brokers working under them should always have a clear legal duty to their clients’ best interest,” Mr Harris said.

“This is not a fringe concern – around 70 per cent of broker mortgages are written by lender- owned aggregators.”

The review warns the surge in the number of mortgage brokers and other advisers in recent years “does not appear to have increased price competition”.

“Non- transparent fees ... and clear conflicts of interest created by ownership are inherent,” it reads.

Even an intervention by the banking watchdog, the Australian Prudential Regulatory Authority, to cool the housing market by restricting interestonly loans to property investors was a boon for the country’s big four banks.

The final Productivity Commission report will be handed to Mr Morrison in July.