Mortgage broker Mortgage Choice has rejected allegations raised in media reports that its remuneration structure has encouraged fraudulent behaviour by some franchisees struggling to meet difficult performance targets.
However recently appointed chief executive Susan Mitchell has conceded that the company's remuneration model needs an overhaul.
Mortgage Choice shares plunged 21.7 per cent on Tuesday after a joint investigation by Fairfax Media and the ABC reported that its franchisees were considering legal action over a new business-based remuneration structure that allegedly led some to cut corners, write inflated loans and even commit fraud to avoid losing income.
On Wednesday Mortgage Choice issued a statement saying it "strongly refutes" the allegations, and that franchisees were required to comply with compliance processes and credit policy controls that safeguarded against misconduct.
The company also said it had not received any notice of legal action and said its model for paying franchisees had been "very effective" helping grow businesses and helping customers.
However in a video interview posted on the Mortgage Choice website on Wednesday, Ms Mitchell said the remuneration model needed to change.
"We acknowledge that our model is outdated, it needs to be more flexible, it needs to be less volatile in the way it pays our franchisees," she said.
Ms Mitchell, who became CEO in April, said she wanted to drive change and her "first priority" was to change the remuneration model.
Prior to her appointment she was chief financial officer at Mortgage Choice and in March had announced her resignation, prior to reversing that decision when she replaced John Flavell, who resigned the CEO post in April.
"I believe that our balance between remuneration and provision of service has gotten out of kilter so we just need to address that balance between remuneration and service provision," Ms Mitchell said.
Mortgage Choice said talks on a new pay model had begun some months ago and it is aiming to have a new remuneration model in place by August.
The stock regained some lost ground on Wednesday, closing 14 cents higher, or 9.46 per cent, to $1.62 in a stronger Australian share market.
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