Nicholas, I find the examples you present to be puzzling, and either naive or deceptive. Since it is unlikely you would deliberately set out to deceive, I can only suggest that you need to do a heap more homework before allowing this stuff to be published where people can see it.

Funding the non-buyers from your rebate pool at the rate of $20 a pop is hardly going to cause a significant reduction in the rate of rebate to the genuine buyers, is it? Even if you had five non-starters for every one successful $250,000 loan, your upfront commission would still reduce by only 10%, wouldn't it? If your business model is that sensitive, it might be time to revisit the whole thing.

So when you say "...we’ve had to reduce our rebates instead. Protecting consumers from small, refundable deposits protects them from the higher rebates we could otherwise afford", aren't you being just a wee bit dramatic? Let's say that you have a 50% fall-out rate - which is astronomic, from an industry point of view - the impact of not having your refundable deposit gimmick would be to reduce the $1000 by $20. Doesn't warrant the drama, really.

Your "radical experiment which would cut deeply into home loan interest rates" is equally overstated and overblown. Many financial advisers are already working for their clients on a fee basis, with commissions rebated directly to the client. This is most often used for investment products, where the outcome in terms of return is far more volatile than with debt products such as home loans. As such, it is a facility that tends to be used by the financially-savvy. The likelihood that the general public would rush to this type of service for what is essentially a commodity loan product is very low.

So with all the huffing and puffing about the ombuds-bogeyman, you conclude that there is some rule somewhere about $20 deposits that is costing consumers $50 per month. Incredible. Literally, incredible.

Thanks for your comments Pericles, but you misunderstand my argument. The point of a deposit is NOT to raise money. It is as the article says "to sort the sheep from the goats" or to find out which of your clients are kidding you around and which value your services and are serious in their inquiry. There are lots of people who run us ragged with inquiries and there is no way for us to find out whether they're serious or not. Last month one of our brokers visited someone for six hours and found out at the end of the process that they had applications in with various other brokers.

Now there's nothing wrong with competition, but then there should be nothing wrong with us being able to charge a deposit. But wait there's more. Our broker also discovered at the end of his evening with them that they had not declared another loan that they had which compromised their application. So that was six hours down the drain - not the failure to raise $20.

And yes, its true that some financial advisors work on a fee for service basis. That has become a norm in the industry so its less likely to prompt complaints, and its permitted by regulation. Our regulation prohibits fee for service charging during for our most labour intensive activity - forwarding applications for loans.

Nicholas, if I have misinterpreted your argument, then you have done me exactly the same courtesy. The statement of yours that I highlighted was "[p]rotecting consumers from small, refundable deposits protects them from the higher rebates we could otherwise afford", which is illogical. By your own admission, the deposit is there only as a measure of the client's commitment to your process - there is nothing at all in that to guarantee the provision of higher rebates. You may still spend the same six hours with the potential client, fail in the sale for whatever reason, and only have the twenty bucks to show for your trouble. How would this, mathematically speaking, allow you to deliver higher rebates?

The consumer is being protected from "entry fees" for which the supplier needs to provide no value in order to keep. Why should the client be forced to take you to court to get the twenty bucks back, should you fail to meet their needs?

My point, which I might have disguised too heavily while trying to be polite, is that it is your business model that sucks, not the regulatory authorities.