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Tech & Science Aussie Home Loans is misleading customers, complaint to ASIC alleges

07:40  27 november  2019
07:40  27 november  2019 Source:   theage.com.au

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Australia's biggest mortgage broker has misled customers with claims that its services are free, it is scanning the market to find the best deal and it will A new complaint to ASIC alleges that a million television, online and in-store advertising campaign by Aussie Home Loans is an example of

But, according to Choice, Aussie Home Loans is receiving a commission of 16 basis points per year for its services and “providing people with riskier loans that take longer to repay”. Aussie is 50 per cent owned by the Commonwealth Bank, a fact it rarely discloses. Choice alleges that 40 per cent of all

A new complaint to ASIC alleges that a $25 million television, online and in-store advertising campaign by Aussie Home Loans is an example of © Supplied A new complaint to ASIC alleges that a $25 million television, online and in-store advertising campaign by Aussie Home Loans is an example of "misleading and deceptive conduct across the mortgage broking industry".

Australia's biggest mortgage broker has misled customers with claims that its services are free, it is scanning the market to find the best deal and it will "find people a quality loan", a complaint to the corporate regulator alleges.

Instead, mortgage broker aggregator Aussie Home Loans is receiving a commission of 16 basis points per year for its services and "providing people with riskier loans that take longer to repay", consumer advocacy group Choice has alleged in a complaint to the Australian Securities and Investments Commission (ASIC).

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a close up of a glass building: Commonwealth Bank owns Aussie Home Loans.© Louise Kennerley Commonwealth Bank owns Aussie Home Loans.

The complaint states that a $25 million television, online and in-store advertising campaign launched by Aussie Home Loans between 2016 and 2018 is an example of "misleading and deceptive conduct across the mortgage broking industry".

"Advertising claims by Aussie Home Loans [state] they will find people a 'perfect loan', 'a better deal' or even a 'good' quality loan," the complaint reads.

"Choice is concerned that consumers who have seen these ads are likely to have formed the incorrect impression that mortgage brokers will scan the market to find them a high-quality loan, when the industry has failed to achieve this."

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Aussie is a leading home loan and mortgage broker with more than 320,000 customers . Let an Aussie mortgage broker find the right home loan for you. For Aussie Select home loans only. Your loan type can be found on your welcome pack or statements.

The complaint also looks at an Aussie Home Loans online advertisement that claims it will "find the best mortgage rate by comparing from over 3000+ home loans".

In reality, Aussie was sending two in five customers to the Commonwealth Bank, which owns the broker, Choice alleges.

"Aussie Home Loans is a well-disguised sales outpost for the Commonwealth Bank," its chief executive Alan Kirkland said.

Additionally, commissions paid to mortgage brokers by banks are adding 16 basis points per annum to the cost of every residential mortgage, the complaint states, citing UBS research.

"The 16 basis point cost is particularly significant in Australia's low interest rate environment when variable interest rates for residential mortgages are now below 3 per cent," the complaint states.

Commissions paid to mortgage brokers were examined by the Hayne royal commission into the financial services sector this year, with the final report recommending that commissions be replaced by an upfront fee.

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But the federal government said it will review the commissions in three years rather than axing them now.

The complaint also references ASIC research that found mortgage brokers were not providing cheaper loans than those people could get directly from lenders.

"People need to have confidence that mortgage broking advertisements are truthful and accurately reflect the services that the industry provides," Mr Kirkland said.

"ASIC must rein this industry in. We also urgently need the strong laws promised by the federal government to force mortgage brokers to act in their customers' best interests."

Mortgage brokers who fail to act in the best interests of their clients could be fined up to $1 million under proposed new legislation.

But Mr Kirkland said the proposed fines are not high enough, especially for the major brokers.

"For larger licensees, such as Aussie Home Loans, the current proposed penalty is too small and will be viewed as a slap on the wrist," Mr Kirkland said.

"Penalties need to be beefed up to at least $10.5 million."

Aussie Home Loans has been contacted for comment.

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