Israel Bans Perks for Mortgage Advisors to Curb Conflicts of Interest
Translated & summarized from Calcalist by baba
Israel's Capital Markets Authority will ban non-bank credit companies from giving mortgage advisors perks like vacations and prizes starting January 2027. The directive aims to prevent conflicts of interest where advisors might favor lenders offering them higher rewards over better client deals. Credit companies will also be held more responsible for loan underwriting, and while professional event sponsorships are allowed, disguised vacations are prohibited. However, the regulation does not address the licensing of mortgage advisors themselves or the fees they charge clients.
The story in 6 lines · by baba
- Israel's Capital Markets Authority bans perks for mortgage advisors from January 2027.
- Non-bank credit companies can no longer offer commissions or prizes to advisors.
- The ban aims to prevent conflicts of interest in mortgage lending.
- Credit companies will bear more responsibility for loan underwriting.
- Sponsorship of professional events is allowed, but disguised vacations are banned.
- Mortgage advisor licensing and client fees remain unaddressed.
Israel's Capital Markets Authority has issued a final directive prohibiting non-bank credit companies from offering mortgage advisors any commissions, grants, prizes, or other benefits in exchange for referring clients. This move aims to end a practice where these companies competed not only on loan terms but also on the rewards given to advisors. Previously, companies offered incentives like vacations to Las Vegas, Ibiza, and Corfu, or gifts worth thousands of shekels, creating a conflict of interest where advisors might prioritize their own gain over the client's best financial interest.
The new regulation, which takes effect in January 2027, broadly defines prohibited benefits, including indirect compensation through third-party companies. While companies can still sponsor professional training and conferences related to housing loans, they are forbidden from covering flights, travel, accommodation, or hospitality for such events. This ensures that sponsorships do not mask disguised vacations for advisors.
The authority also clarified that credit companies will be independently responsible for verifying a client's repayment ability, assessing collateral, and conducting underwriting processes, rather than relying solely on advisor recommendations. Companies must obtain client authorization before a representative promotes a deal and adopt board-approved work policies reviewed annually.
While considering less stringent measures like mandatory disclosure of commissions or reward caps, the authority concluded that these would not sufficiently neutralize the conflict of interest. A significant issue remaining unaddressed is the lack of direct licensing and supervision for mortgage advisors themselves, with a proposed bill to regulate the profession still pending. The new directive does not limit the fees advisors can charge clients, leaving the cost of advice open.
