What the royal commission will mean for mortgage brokers
From cracking down on commission-based payments to mortgage brokers to improving services in remote areas and ending informal overdrafts and dishonour fees on basic accounts, at its heart the royal commission's final report points to the very real need to drive cultural change in the banking sector.
If the recommendations are adopted, consumers will see big changes in the way they engage with banks. Most noticeable will be the way the proposed changes to commissioned-based remuneration structures fundamentally change how consumers engage with mortgage brokers and the banks that pay them.
In effect, the days of a mortgage broker offering you "free" home loan advice before getting a commission from the bank when you sign your life away may soon be over.
One of the key recommendations will force mortgage brokers to act in your best interests, and while many consumers might be surprised to learn this wasn't already the case, engaging a broker in the future will see you pay upfront.
While the mortgage brokers might argue that getting a home loan could get harder, there have always been many ways for consumers to engage with the home loan market.
In fact, comparison sites such as mozo.com.au provide a quick and effective way for consumers to get an idea of the range of loans available and the interest rates they can expect to pay before they start negotiating with a lender.
Ultimately, if the recommendations stop people being aided by mortgage brokers and bankers from accessing home loans they couldn't really afford, that's a good thing.
To help drive the cultural change needed, many of the recommendations serve to reset the relationship consumers have with their bank.
Whether it's ending unfair fees or forcing banks to find a "suitable way" for customers in remote areas to access and undertake their banking, consumers should start to get a better deal.
One of the key banking recommendations is ending informal overdrafts and dishonour fees, which should help to slow down the passive-fee frenzy in everyday banking.
Small businesses are set to benefit from the recommendation to change the Banking Code's definition of "small business". Under the proposal, if the loan being applied for is less than $5 million, businesses with fewer than 100 full-time-equivalent employees will qualify under the new definition.
Farms are also set to benefit through a proposal to create a national scheme for farm debt mediation, better valuation of agricultural land and restrictions on banks charging default interest on loans after natural disasters. That stands to greatly benefit farming families in time of drought.
Culturally, perhaps one of the most significant proposed changes relates to industry codes of conduct. The report calls for these codes to be approved by the regulator ASIC and include "enforceable code provisions". This would mean any breach of the code would be seen as a breach of the law and carry the associated penalty.
Much of the work ahead for the big banks will be in trying to restore trust with their customers and the public. This is something that might prove challenging as they stare down a number of court cases and breaches that warrant further investigation.
One thing is certain: the big four banks have taken a public hammering. They now have a lot of work to do to get consumers back onside at a time when many are increasingly embracing online-only alternatives and seeking new relationships with emerging companies that are more attuned to their needs and expectations.
But perhaps the clearest outcome from the royal commission is that the age of banks apologising and publishing a non-binding industry code before going back to "business as usual" is nearing an end.