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Clawbacks 'not okay', says broker

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Australian Broker | 21 Mar 2014, 08:30 AM Agree 0
Brokers are being urged to come together to protest the 'unfair' practice of clawbacks
  • Brado | 21 Mar 2014, 09:14 AM Agree 0
    Surely there isn't a single broker out there that thinks clawbacks are fair and just... and I agree, they should only be applied in the case of proven churning. If a client sells or refinances due to the circumstances beyond the brokers control, there is absolutely no fairness at all.
  • Dave Robinson | 21 Mar 2014, 09:15 AM Agree 1
    Aggregator's and the heads of the 3rd party divisions will not address this at any level. AFter 20 years, 3 aggregators and numerous discussions none of these individuals care...it's not their money. This is the clause that MFAA members need to use: The issue of clawback should not be one in which MFAA involves itself unless there is evidence of systemic unfairness by a particular lender as to the implementation of its claw back policy.

    MFAA I have 2 lenders for you; Bankwest and Westpac (and is various other names, StG, BOM BankSA etc).

    If you are an MFAA member and agree with these add your name here.
  • Xavier | 21 Mar 2014, 09:28 AM Agree 0
    I am a broker and I think there is an argument for clawback but the clawback periods are way too long. They could be justified over 6 months maybe or so but not 24 months
  • GC | 21 Mar 2014, 09:29 AM Agree 2
    Question:
    Are the branches hit with clawbacks if a branch written loan is refinanced away? If not then why are brokers penalised? The lender is the once who is technically dong the business. We are paid for the "introduction" plus we do most of the work for the lender. If the lender loses the client then they are the ones who should be penalised.
    This will never be resolved until 1 or 2 of the lenders disband the clawback clause and unfortunately I cant see this ever happening.

    Dave, I wouldnt bother with complaining to MFAA. We all know they are spineless and are in bed with the banks. You are wasting your time.
  • John | 21 Mar 2014, 09:31 AM Agree 0
    Absolutely, proven churn based clawback is appropriate.
  • Craig Budden | 21 Mar 2014, 09:32 AM Agree 1
    Agree with the comments so far, but as for the statement .."ACCC and ASIC will say ‘the broker willingly completes the tasks knowing clawback is part of the deal." What choice do we have? Can ASIC please explain how I can submit applications to lenders where clawback is NOT part of the deal? As for MFAA...just ask yourself this. Who are the major sponsors of MFAA?? I see no reason why I should ever be penalised for a client leaving a bank due to their poor service, or another bank/broker churning their loan.
    I'd propose that in place of the current process, if a client has only had their loan for 12 months or less, any clawback should be borne by the new writer/lender. THEY are the one's knowingly refinancing a loan that the KNOW incurs clawback. If refinancing at that early time is such a good move for their client, then they will be reimbursed for clawback by way of upfront commission.
  • Ian | 21 Mar 2014, 09:35 AM Agree 0
    The answer is simple have a clause in your broker contract that states if the client discharges the loan within the time frame of clawback, with the lender you have placed them with, that you will pass the clawback amount onto the client as a fee.
    Tell the client up-front before they sign the broker contract of the clause and it's implications and then have them sign it.
    Thus the discharging of the loan within clawback time frame is not worn by the broker but the client, which they are fully aware of and have signed an agreement to.
    If the client doesn't agree you will most likely have just saved yourself a lot of time on a file you eventually get no money for.
    The other thing it does is the client will call you when they are thinking about doing something rather than just going off direct to a lender or another broker.
  • Glenn | 21 Mar 2014, 09:35 AM Agree 1
    Clawbacks are and have always been unfair. Perhaps we should look at the circumstances behind what has happened to create the clawback in the first place. Is the client staying with the original broker and just restructuring? Is the client selling up and not purchasing anything new.? Clawbacks were brought in to stop "churning". I don't know any brokers who actively seek to churn, so maybe the banks should have a softer line on this and stop just screwing us whenever they can.
  • michael eberand | 21 Mar 2014, 09:36 AM Agree 1
    good on you Maria and Australian Broker. The banks say the incidence is minimal, so therefore, there is minimal impost on them, yet as individual brokers, the impost can be massive. Vote with your feet. If you are a significant volume writer, let that bank know you are unhappy and will consider using Advantedge whom have a fairer 50% clawback policy (but which the clawback period continues to remain too long).

    The lenders are competing for our business. We need to come together and let them know what basis they need to compete on. Clawback should be one of them.
  • michael eberand | 21 Mar 2014, 09:38 AM Agree 1
    how about we bandy together and tell MFAA and our aggregators if they don't do something about it, we will form a body of people that will truly represent us !!!!!
  • Steve-o | 21 Mar 2014, 09:42 AM Agree 1
    I agree with Dave and Brado, just don't pin any hope on MFAA or FBA being able to help Brokers in these issues, the can not and will not get involved. Lenders must laugh at the Broker Industry, presenting unreasonable Terms of trade which we have not option but to accept. The only change in Broker space last 10 years has been 30-40% reduction in commissions, and increased claw back conditions. Time to talk but no one to represent the Broker Industry, Landers continue to laugh! Keen to hear of any clever ideas on these matters, but please, let us not get into fee for service space.
  • Melbourne Broker | 21 Mar 2014, 09:47 AM Agree 0
    I've worked for a Bank, and now I'm a broker. As frustrating as clawbacks are, the banks aren't a charity case. Why should they pay upfronts and then have to carry the costs if a loan is repaid within 12 months. The banks have a responsibility to look after shareholders. Running a model that potentially exposes the banks business to churn and large upfronts with no recourse would be a model that is destined to fail and in the long run would only serve to create bigger issues for the broker industry. If clients repay within 12 months, then either your relationship isn't strong enough or you don't understand the client needs.
  • Nicole | 21 Mar 2014, 09:49 AM Agree 0
    I think there is merit for clawbacks in some cases, such as not meeting customer needs, demands. If there is a pattern with a broker churning then clawbacks definitely appropriate. BUT, how many brokers actually do that these days? I recently had a clawback - first one in a few years - when I called the client it was simply that they had an offer too good to refuse to not sell their property even with break costs of a fixed rate. So the bank got their money back with the breakcost and from the claw back. I feel that this is not fair. I think it should be a case by case basis on clawbacks. I would be happy to do this extra paperwork to keep my commission if I had deserved to retain it.
  • Patrick | 21 Mar 2014, 09:49 AM Agree 1
    Yep - 2 loans - 6000 this month! Both situations where clients sold due to personal circumstances. We have done all the work and get 100% clawed back. In fact we have lost hundreds if not thousands in acquisition and processing costs that are all covered upfront before we get paid. Where is the parity - if banks truly say they are supporters of the broker market - then this needs to be addressed. Can one bank show their kahunas and deliver on something here! I guarantee your market share will increase significantly.
  • R Ted | 21 Mar 2014, 09:50 AM Agree 1
    Banks love us because we wear the cost of their failings.

    we boost their bottom line and are a safety mechanism that reduces their loses via a claw backs.

    how dumb are we. forget about government subsidies we are subsidising the banks.
  • SanityPrevails | 21 Mar 2014, 09:58 AM Agree 0
    So, if in this instance there was no fallout from the "long term client", why didn't the client call you to discuss and arrange the refinance on their behalf? my aggregator assisted me in having a claw back reinstated, even when the claw back occurred whilst I was at another aggregator, who can beat that? I completely understand the need for claw back from the lenders perspective, they too spend time and money on having the loan assessed, valued, documented, settled, ATM cards produced, online banking created etc. Having said that, I think the length of the claw back period could be reviewed.
  • Scott | 21 Mar 2014, 09:59 AM Agree 0
    Lenders will resist this out of date rule. As it’s a control function. What other professional body would accept paying back at say 13 mths income earned. It’s a policy rule from the last century that has carried over without review
    In consideration to the industry wide acceptable NCCP rules. Brokers need to comply and qualifications held this again supports the observation that this is an out of date rule.
    Not sure? A Suggestion
    Do the sums on lender clawbacks over your business last 12 mths.
    What was the figure to any clawbacks?
    Then how many hours work was lost? And lastly was it your fault?
    A suggestion could be - Lenders phase this policy out in 2014 to 2015 to be removed like DEF’s were done
    This policy clearly was designed for protection to any churn implications, but again this is small issues now days and with the change stated above and with its removal gives a better future to the business over all
    Why - It’s not reasonable in this day and age that an adviser is exposed to 100% clawback of their income period
    I agree with others that a collective voice needs to be heard on the common sense approach.
    Why it’s a leadership (MFAA & FBAA) approach not a sole broker who will be drown out. I worry as if not addressed it will always be the broker is being the one that paying the cost?
    Our industry body's needs to consider this and tackle the objective being a phase out of clawback for Authorised brokers in 2014 for the collective good for all parties.
  • Ray | 21 Mar 2014, 09:59 AM Agree 0
    I have a clawback clause in my quote that the client must agree to. I have not worn the cost of any clawback since implementing this. Any self respecting broker should be doing the same.
  • Mini Broker Pakenham vic | 21 Mar 2014, 09:59 AM Agree 1
    I agree with Maria Rigoni 100% and give my support to any campaign directed to crushing unfair clawbacks. I've had 2 deals clawed back in the past 12 months to a $ value of $2,900 one deal having significantly improved a clients financial position,consolidating numerous debts 9 months earlier. The client was then talking to her own long time Bank who convinced her to refinance for a better deal When I contacted the client she apologised saying she did think she should have come back through me, but it was a spur of the moment action when she visited her Bank. I wonder if even a fat cat CEO of a major bank had $3K debited from his bank account out of the blue, would they mind at all ?
  • Susan | 21 Mar 2014, 10:05 AM Agree 1
    I absolutely agree. We should be screaming about this unfair practice. I have a client that is about to sell their home for personal reasons so I will be clawed back 100%. How is this fair!!! If they had got their finance through a branch, the bank staff wouldn't have their wages clawed back. What is the difference???
  • Rex | 21 Mar 2014, 10:07 AM Agree 0
    Seriously folks... simply observe Rule #5
  • Giles | 21 Mar 2014, 10:08 AM Agree 0
    Deferred establishment fees made perfect sense where they were set at reasonable levels (they were abused by some non-bank lenders). There is a lot of effort and cost for the banks and brokers to establish a loan - looking after a clients purchase of a property or refi to a better deal. In this day and age where the govt is pushing to remove the age of entitlement, then clients that sell or refi before 18 months should have to pay reasonable fees for the establishment of the loan. Wasting a brokers time to do all the hard work, then internet based lenders refinancing soon after is just wrong.
  • Darren | 21 Mar 2014, 10:10 AM Agree 1
    Clawbacks should only occur when the loan is refinanced. I don't agree with clawback policy for sale of homes as the broker has no control on home sales.I find homes can be sold within 18mths due to separations etc which is not in relation to churning.these are the 2 definitions that annoy me in regards to clawback policy.
  • Shirley | 21 Mar 2014, 10:10 AM Agree 0
    Clawback is unfair most especially the lender that claws back for 24 months. It should be in a case to case basis because like a client that refinanced to build a house and eventually sells the old house to pay off the loan in the new house. When the loan was negotiated, the client says the old house will be for rent then all of a sudden, the client sold it. It's not within the control of the broker the decision of the client. Lenders never loss anything from this client because the house was sold or they have been paid earlier. It was not moved to another lender which will be considered as churning. This lender doesn't give any trail for a year and yet claws back within 2 years . Although I foresee it to happen in a month or two for this case, hope this lender will consider the hard work and effort of the broker that introduced business to them. Lenders, please be fair. I was clawed back for 50% after 20 months with this lender. How much more with this new one wherein 2 loans are involved.
  • mac | 21 Mar 2014, 10:16 AM Agree 0
    Westpac 2 years is not on!
  • Jeff Purcell | 21 Mar 2014, 10:18 AM Agree 0
    Unfortunately the Bank's/Lenders are not playing fair.
    The Lenders are in a position to ascertain if churning is happening in a broker portfolio, if this is happening then clawback is appropriate.
    For the rest of the brokers there should be a more fairer methodology that does not see the Broker 100% out of pocket ie:- if the loan is repaid/refinanced within 12 months we share the risk 50/50. It should not be any longer.
    The Lenders are making huge profits and yes they have shareholders to answer to but the large proportion of their profits come from the home loan book which supports their overall operations to be able to operate in other areas.
    If you churn your book you pay the full price after all you are making money
  • chrisc | 21 Mar 2014, 10:24 AM Agree 0
    Yes, clawbacks were introduced to stop churning - that's fine but not where the client forces an early payout eg. by selling or by paying off a loan because they inherited funds, if the Banks would play on a fair platform, the Banks should cost their loans more appropriately to allow for this and as they all do the same, remain just as competitive as they are now. After all, the rule of business is that we should be able to pass our costs on to the consumer. The Banks choose to pass their costs onto the introducer who cannot pass it on anywhere and the consumer who should be paying the cost, gets it for free. Brokers are the easy target as we have seen with Gov't banning DEFs on the consumer with Banks getting a bad name. Until the aggregators work for the Broker, it will not change but how can it change when a lot of the aggregators and supporting bodies are 'owned and/or policied' by the Banks. I've said it before and will continue saying it - in my view CONFLICTS OF INTEREST are held across the Broker system and the Broker will always be the scape goat.......NCCP terms of reference also supports this view if you actually take time to read the act.
  • Jennifer Wagg | 21 Mar 2014, 10:34 AM Agree 0
    Clawbacks make this job harder. I agree that we should not be penalised if a client refinances through no fault of the broker. Who else apart from Planners do the work and then pay the money back, no one????
  • Vicky | 21 Mar 2014, 10:41 AM Agree 0
    This is copy of my question to my industry body last October - sorry to say no response was received but I believe it is relevant to this discussion:

    I have only been broking since Nov 2009 (yes at the onset of GFC) and have not been able to build a viable business and have to work part-time to supplement my income. I have finally managed to get my trail up to around $700 per month.

    I totally agree with the concept of banning any restrictive practices that prohibit clients from exercising their right to change lender – for whatever reason, they don’t have to justify why they want to move.

    I do, however, totally disagree with the practice of lenders charging clawback if a client refinances within the ‘clawback timeframe”.

    The introduction of the exit fee ban by ASIC only acceded to pressure from one group – and that is the financial do-gooders who went in to barrack for the poor client. No-one appears to have gone in to support the poor old broker.

    Prior to legislative changes, many lenders did not charge clawback, choicelend being one them. Post exit fee ban, they introduced clawback – and wouldn’t you know it – one of my choicelend client’s refinanced away (without my knowledge) and I got hit with clawback. The amount of the clawback was over $800 and basically took all of my trail commission for two months (at the time I was only getting about $400 per month trail).

    Now I know the issue of clawback is just a whinging category for brokers, but as my industry body, we need to appeal to you to do something about it.

    When I compile my annual business plan and get to the risk identification section, I have to put down that 100% of my income is at risk of clawback. What sort of idiots would start a business when 100% of their income was at risk!!

    My understanding is that when clawback was introduced, it was to prevent broker churn. Of course I can understand the rationale in that. However, what broker would purposely churn during clawback period and have to do twice the amount of work for the same money? This rationale is outdated and incorrect. Lenders are clawing back to recoup their costs regardless of the effect on the broker’s livelihood.

    At the last MFAA forum in Brisbane, I did ask if ASIC had been approached to discuss this issue. I was told they had, and that the response was the charging of clawback was a commercial decision by the lenders.

    Well my commercial decision is that I don’t acknowledge the validity of their reasons for charging it and I believe it is an unconscionable practice.

    I admit to not being the best authority on this issue, and I am not naive – I know that the lenders will get their money whichever way they can, but we should be paid for the work we do and have the comfort of knowing that the income has been earned and is ours.

    I feel this issue now needs to be addressed, clients are refinancing through no fault of brokers and the charging of clawback where it is legitimate refinance has to stop. Perhaps we should go back to the days where all lenders charged an upfront fee – this was certainly the case when I started as a bank lender 20 years ago. It was a canny marketing move from many lenders to remove the upfront fee and tag on a sneaky little DEF on the credit contract!

    The days of the broker paying has run its course. Time to impress on ASIC the professionalism of the industry and also to impress on the Banks that we are a viable source of business who should not be penalised. I am sure that in my banking days that if one of my home loan clients refinanced away within 18 months of me writing the loan, the Bank Unions would have had a field day if the bank had not paid me for a month!!

    As far as exit fee ban goes – good idea for consumer – not for broker.

    Need our industry body and ASIC to get a change – if the lender can prove broker churn – go ahead, charge it, but if the broker can prove it was not churned then the income should stay with the person who earned it legitimately in the first place.

  • Bottom Line | 21 Mar 2014, 10:42 AM Agree 0
    MFAA have done a lot of work on it??
    Interesting quote given nothing has changed in my lifetime. Clawback when an investor gets a terrific offer on a house he bought 12 months ago, and sells. How am I supposed to stop that?
    ANZ clawed back on a loan where the client sold a house, yet still had the remaining 750k in ANZ lending, business accounts, c/card etc that we bought to them. Client remains an ANZ client. I guess the message is that Banks want us to combine all debts into 1 loan - that way I would have avoided clawback. Done separately I lose money.
    Also, can I clawback any bank whenever they get documents wrong, miss settlement, lose paperwork (even though it's emailed), forget to progress a file etc??
  • oldBroker | 21 Mar 2014, 10:46 AM Agree 0
    Clawbacks are not Ok ever. Even on churn since this would take resources on both sides to prove churn resulting in far greater costs.
    Historically, brokers have been 'introducers' with no contractual power, hence the ability for lenders to set the terms of the relationship. But now we are regulated and licensed and should be on-par with the AFSL.
    The aggregators will NEVER do anything about this because they know that they no longer have the power to do so now that the ACL is here. Their biggest fight now is protecting the power they do have, not fighting a contentious battle with the end-result requiring a significant change in the broker industry. Why would they do this?
    And I love how the associations side-step the issue. The MFAA says "unless evidence of systematic evidence of unfairness of a particular lender". Try to look deeper, Mr Naylor. The whole current policy is unfair. The entire system is unfair. It is, by definition, systematic with a capital S.
    Mr White, FBAA, says "biggest power is to take loans elsewhere". Well, that's a silly comment because a) NCCP forbids us to do that (and he knows this so why does he say it?), and b) our biggest power is to recognise that regulation and the creation of the ACL has changed the landscape and has shown that the old policies must be modernised. Our power, Mr White, is now the ACL.
  • Michael Eberand | 21 Mar 2014, 10:47 AM Agree 0
    Good on Maria and Australian Broker.

    The banks are saying its a small line item; well it would be to then, a pimple on the elephant, to us, it damn well can hurt.

    The lenders are competing for our business; we need to collectively tell them that this is a critical item. Particularly those who we write our largest volumes. Point out that Advantedge is 50% clawback only which is much fairer and if they don't move, we will vote with out feet.

    We should also be letting MFAA and our aggregators know that if they think its too hard to represent us, then we should be threatening to form our own body to stand up to the commercial realities of the situation,
  • Skeptical | 21 Mar 2014, 10:48 AM Agree 0
    The Lenders clawback every chance they get for whatever reason including if the client does within their clawback period. Yet they charge the client early termination fees as well in many cases. Double dipping. I think one of the worst cases of Clawbck is Suncorps. Has anyone ever actually read what they clawback for. And the overall time they clawback for is also horrendous. Still how else are the banks going to make their big profits.
  • Anne | 21 Mar 2014, 10:52 AM Agree 0
    Where else do you get a free marketing, sales and process operation other than mortgage broking.....the current discounting and market forces by the lenders is actively encouraging churn from one lender to the other, not by individual brokers.

    It is manifestly unjust and would be deemed immoral for a large industry to expect unpaid workers to share the risk of what should be the cost of the lenders doing business.

    Fairwork would find against this in any other industry as being unconscionable conduct.
  • Jenine | 21 Mar 2014, 10:52 AM Agree 0
    I absolutely agree that clawbacks are unfair and unjust. If the client is unhappy with the banks service or cost, then that is on the bank. If they have decided - for whatever reason - to sell and pay out the loan, that is on the client. As the system currently stands, it is a disreputable practice not only of the banks, but of the party refinancing the loan, knowing that the previous broker will be charged a clawback.
    For 2nd tier loans, we will now only use Pepper, LaTrobe or MKM as they do not clawback. We have even considered no longer helping clients who have had an event that has caused them bad credit. But for the bulk of our loans, there is no alternative for no clawback. It is absolutely the role of our Professional bodies and aggregators to lobby the banks on our behalf. If MFAA will not speak out, then brokers should vote with their feet there also and change to FBAA, who sound like they are prepared to make a bit more of an effort. The same applies to the aggregators. From strict compliance to unfair clawbacks, brokers seem to be everybodies punching bag. And for what? If I sell a house worth $1,000,000 i would earn about $25,000. If I finance the same house at 80%, I earn a maximum of $5,600. Is anybody clawing back the real estate agents commission if the house sells again in under a year? Or the conveyancers fee? Or the removalist's cost? How about the Stamp Duty? Does the government pay that back? The banks can't even charge the customer break fees anymore, but for some reason it is completely fair to take back the "Introduction fee".
    Give me a break.
    PLEASE, give me a break!
  • Cbrown | 21 Mar 2014, 10:55 AM Agree 0
    removing the early termination charged to clients has made it even easier for clients to switch and change as they like, they should have kept def and remove claw back, that's taking our money to live, pay our own mortgages, if it isn't hard enough already to get deals approved these days, and the extra paper work that is getting beyond a joke
  • Catherine | 21 Mar 2014, 11:04 AM Agree 0
    Hooray, finally brokers look to be standing together against an unfair practise. I've complained before about another of lenders unfair practises to a group of brokers and only got "well it's a business decision for the lenders". When I pointed out that it isn't even a good business decision I was told to pull my head in. Go Maria. I'm with you.
  • michael eberand | 21 Mar 2014, 11:09 AM Agree 0
    those saying 'put a clause in the contract and charge the client' , what rubbish.

    I introduced the clause some time ago. I explain to my clients, I do not charge them but am remunerated by the lender, but if the lender takes that back because of payout within 18 months, then I charge you as otherwise I am not paid for my service. Client nods, understands, fair enough.

    But then when it comes time to pay, screaming, not fair, not their problem, so you end up with either i) a very unhappy client who won't do business with you again or ii) the need for legal action, now who wants to take action against their own client. costly, doubtful, hurts your branding.

    The idea of explaining to clients how we are paid is good, but don't expect them to cough up, in my experience, less than 10% of clients will understand this and be prepared to pay.

    There is ample evidence above as to where the fairness rests on this. This cost for churning is BS as well, it should be a free market, the principals espoused in the economy, all the banks have done via clawbacks is transferred the DEF costs from customer/consumer to broker.
  • Mark Perth | 21 Mar 2014, 11:10 AM Agree 0
    When a client purchases a Property the Real Estate Agent, Valuer, Settlement Agent, Pest Control Inspector, Bank ( Application fee) Solicitors and of Course the Broker gets paid (in some cases 7 weeks after the Settlement date) unlike the other Professions listed above. The only Profession to have there hard earned money taken back from them for up to years is the Finance Broker???????? Clawbacks Marina Im with you lets get together to stop this absolute disgrace that is happening.
  • oldBroker | 21 Mar 2014, 11:16 AM Agree 0
    @Melbourne Broker. I find your comments interesting. The hardest and most expensive thing for business is attracting new customers. And every business recognises that there are costs associated with bringing that consumer on as a customer... marketing, sales, meetings, referral fees, setup, processing, etc. And when you accept this new customer, you accept the costs associated with this new client. If the client somehow doesn't work-out for some reason, you can't go crying back and demand these costs back. No business (other than maybe oligopolies) can do this. Especially considering that this new customer is probably making the bank revenue in other areas... deposits, credit cards, insurance, etc.
  • Patrick McMenamin | 21 Mar 2014, 11:21 AM Agree 0
    Where is the "commercial agreement" accepting clawbacks? This clawback policy, as with earlier commission cuts, was unilaterally imposed on aggregators/brokers. In the case of clawbacks, as surrogate exit fees when exit fees were banned by legislation. I ask: Does that legislation only ban exist fees imposed on the borrower or does it ban exit fees outright? This is a question for the Courts and MFAA/FBAA ought to support their members and facilitate arrangements by aggregators/brokers to jointly obtain council advice as to the prospects of a class action. If a class action has "legs" then such action could be funded on a contributory basis by aggregators/brokers. The correct question to litgate would be: (a) "Can one party to a commercial agreement unilaterally alter the consideration integral in that contract? and (b) Even if possible without agreement between both parties, is such action a breach of the Trade Practices Act as "unconscienceable conduct" given the clear lack of equal bargaining power between aggregators/brokers and lenders?
    Further if the incidence of clawbacks is so small as claimed by MFAA/FBAA why are they imposed at all? If only 1 in every 50 broker introduced loans discharges within the initial 24 months (ie 2%) an increase of just 0.01% to all interest rates would fully fund the cost, based on an average 12 months life of early discharges. Finally MFAA/FBAA hands are not tied as they claim, they could at the very least have a charter which states that clawbacks are regarded as an unfair practice and they could make membership for and sponsorship by lenders subject to adhereance to their charter.
  • Jerry Gibb | 21 Mar 2014, 11:22 AM Agree 0
    Agreed do all the work , then for some unknow reason we get clawed back , what professions works for nothing ....not one so I say yes lets look to getting this removed. If we chrun then so be it but any other reason we deserve our pay for the hours spent with interviewing,compliance etc.
  • oldBroker | 21 Mar 2014, 11:25 AM Agree 0
    @Mark Perth. This is because brokers have no contractual relationship with the lenders. They can set the terms. The only contract is via the aggregators and just try to get them to move on this. We have the ACL now, and we need to change the contract.
  • Peter Economos | 21 Mar 2014, 11:35 AM Agree 0
    Hi all, The banks will not back down on this. Just 2 weeks ago I had a clawback for nearly 3k on a loan that was settled 8 months ago. I contacted the client, as it was a 300k 3yr fixed rate and 165k variable. Client has EXACTLY the same loan, he had just split with his partner and St George told him to "come on in and discuss it", St George rewrote the loan exactly as it was, leaving the structure the same, just removing the pertner from the loan. I complained that they took my client, who I introduced to them and shafted me. End result? I will get half of the upfront back and half of the trail ongoing. Who makes the rules to give half? is that not admitting that it is wrong in any case? My Aggregator was no real help in this situation either. I have had clients redirected to me when the same situation applied from our second tier lenders. Don't expect too much from the mainstream banks. Pete
  • BF | 21 Mar 2014, 11:40 AM Agree 0
    I agree that it needs to be reviewed but not band. Why, how did it occur?
    Did the bank make so many mistakes a complaint was raised and the customer left?
    Did the broker drop the ball and not provide an attractive loan?
    I've just had an instance were parents became sick and the client was looking to sell and move - it would have resulted in a $10k clawback. I rose the matter with the bank and it wasn't going to be clawed back due to the circumstances. In the end customer kept as an investment.
    It frustrates me banks are now paying customers up to 1500 to move, that leaves us open to loss of business
  • Tony | 21 Mar 2014, 11:48 AM Agree 0
    Ok, No body believes claw back is fair. All said what are we going to do about it ?
  • Dave Robinson | 21 Mar 2014, 11:49 AM Agree 0
    Lets start a petition! Send it to all aggregators and industry bodies and lets see who responds.

    Not only will help bring this matter to the front we will also see who REALLY supports their clients. Yes that's right we are clients of those mentioned above.

    Anyone interested?
  • VIC Broker | 21 Mar 2014, 12:00 PM Agree 0
    The banks simply eat brokers to the bones if they could.
    Can any body see a bank went loss recently even during the GFC ? No (http://www.abc.net.au/news/2013-11-04/chart-big-four-banks27-profits-2004-2013/5067858). Instead their billion dollars in profits kept climbing high!

    Simply they just want more dollars in their pockets - broker incomes never would be their concerns.

    ASIC and MFAA and all other related bodies who asking all kind of fees and tons of regulations which only limit broker services and increase risk of losing licence - sadly can not come up with a single clause that protects brokers hard earned incomes!

    So it is unnecessary for the arguments of fair or unfair. Of course it is UNFAIR! Brokers are only ones who suffer in the end.

    Very disappointing!!!
  • Broker | 21 Mar 2014, 12:05 PM Agree 0
    Clawbacks are an utterly disgrace policy and the banks would have 10 year clawback clauses if they could , and their margin on home loans have never been better since the post GFC rate gouging.

    I have a clause in my Brokers Contact and all my clients have no issue with this – if they do then they won’t be my client , pretty simple really , let them waste somebody else’s time

    The banks tears and lies about cost of funds are continuously followed up with year on year record profits , all achieved in a very soft economic times. All this means is that we are all paying more.

    Brokers also need to vote with their feet and avoid the big 4 whenever possible, as reducing their market share is the only way to send message
    As for ther MFAA , FBAA and our Aggreagtors expect nothing and you will still be dissapointed…as all these organisations do is feed of our income for doing very little.


  • Brett Perth | 21 Mar 2014, 12:07 PM Agree 0
    Licensing, NCCP, regulation we need to be seen as professional, put a value on yourself!!!
    How professional are we when the Lenders dont see the the value in our service?
    How un professional!
  • Perth Broker | 21 Mar 2014, 12:09 PM Agree 0
    If anyone is expecting any support from the MFAA - think again because they are run by the Banks and will at all time fall into line with what the lenders want or demand them to do.

    The process of clawbacks is abhorrent and as mentioned earlier by a correspondent it is simply a case of the lenders shifting the DEF from the customers to the brokers. Nice piece of fancy foot work that! I also refuse to deal with Suncorp because of their claw back policy.
  • Sunny | 21 Mar 2014, 12:11 PM Agree 0
    Well if they want to have claw backs, why not give us a safety net that under all circumstances we wont have to pay back 100% of the upfront....
  • Papery | 21 Mar 2014, 12:12 PM Agree 0
    Cant agree more, but shouldnt we be banging on the doors of the Office of Fair Trading (although I suspect this might be a consumer body.
  • Really? | 21 Mar 2014, 12:12 PM Agree 0
    Fee for service.

    Who cares if they then repay the loan, for whatever reason. Any pure commission based function will be and should be subject to a clawback system of some kind, as there will always be people trying to cheat the system. That small amount wreck it for everyone.
  • mac | 21 Mar 2014, 12:16 PM Agree 0
    But without clawbacks we wouldn't really need aggregators would we? Just a CRM.
  • oldBroker | 21 Mar 2014, 12:16 PM Agree 0
    I can guarantee that not a single aggregator will post a comment on this subject.
    A number of posters have suggested petitioning their aggregator. They will NOT act. Period. They will not shake the tree to get the apples when they know the whole tree will fall.
  • Papery | 21 Mar 2014, 12:17 PM Agree 0
    Im surprised some clever insurance policy hasnt been developed to protect us against clawbacks....Imagine the premium!!
  • Denise Brailey BFCSA (Inc) | 21 Mar 2014, 12:29 PM Agree 0
    Lenders have been skimming everyone. There used to be an Act called the Truck Act "a Many shall be paid for work done" Nothing to do with trucks (1890) "I will have no truck with that." I won land mark case - but that's another story.
    Lenders set up the loans to implode within 3-5 years...as the Engineers they set it up and knew the consequences would be for all of you and your families. You were unaware of consequences for you and your families. Lenders failed to send out the memo of risk. Churning was raging with Insurance Companies in the 70's remember Scottish Amicable? Its an old game same consquences. Bit of truth would be nice, when you actually sign up to sell their products. Yes claw backs are hideous.
  • Peter White - CEO FBAA | 21 Mar 2014, 12:35 PM Agree 0
    G'day everyone, nothing like healthy discussion which is a very good thing.

    For the record, the FBAA as no legal standing to fight your legal commercial business contract challenges - if you don't like the brokering terms a lender has then don't sign up with them and take your business elsewhere. You have potential choices if you want to or can use them, and if they are not unsuitable for your client.

    But that said from this day forward every meeting I have with a mortgage lender I will bring this up and endeavour to find a resolve if one can be found. I will do my part - you need to do yours too.

    As to a couple of comments made please note (and remember not only did I participate from the beginning in bringing this legislation to market via the industry consulting committees & meetings with Ministers & Regulators, but I am a 35yr lending veteran in this industry cutting my teeth in CBA in the '70s):- so to the anonymous "OldBroker" .... you have not understood the totality of the legislation based on your comments. Brokers to have the right to put forward to their clients all lending options that are NOT UNSUITABLE for the client's needs, and being based on that which they (the broker) has access to. So if you have two or more lenders that have the same benefit fees rates etc etc to the client and none are unsuitable for the client's needs then you are perfectly within your right to offer 'any loan' that is not unsuitable and with all options that are not unsuitable for the client's needs - as per the legislation.

    Secondly to the anonymous "Melbourne Broker" .... does this then mean when a bank officer writes a loan and it is then discharged in say 12 months time their salary should be clawed back ?? One it doesn't happen and two no it shouldn't. Same with brokers. The work has been done and the person paid accordingly and there it must stay - NO CLAWBACK - unless deliberate churning solely for "profiteering" sake is being undertaken and that it has no benefit to the client (my comments are not always written in totality by journalists).

    Time for the banks and lenders to step up to the plate on this ..... and note we/FBAA have been very vocal on this subject in the past in the press and our views are unchanged, albeit they didn't do anything then either, so this is why I say everyone needs to get behind this and do their part (including more from the FBAA as noted herein) - regards Peter

    (and feel free to email me at pwhite@fbaa.com.au on this or any matter you feel we need to be more involved in)
  • Broker | 21 Mar 2014, 12:41 PM Agree 0
    Over to you MFAA - are you there Phil?????
  • Tim H | 21 Mar 2014, 12:48 PM Agree 0
    I have had a clawback clause in my Finance Broking contract for over 12 months now that I highlight to the clients. Been fortunate enough to have had only 1 clawback in this time and the client happily paid up. Call me lucky if you will but they got an incredible offer to sell an investment property they had purchased.
    In regard to Clawbacks I think the Bankwest system is fair. Clawback period is 18 months and clawback reduces by 1/18th each month during this period.
    What we have been told in the past is that it takes say 1 to 2 years for the lender to recover their costs of putting the business on the books. Assuming this is a gradual process then this really does make the Bankwest system the fairest way to do it.
    So if clawbacks are to stay as it seems they will then what we as brokers should be asking regulators, aggregators, associations and anyone else who cares to listen to do is get all lenders to look at the Bankwest system and follow their lead.
  • Not happy | 21 Mar 2014, 12:58 PM Agree 0
    I had a clawback last year because the client had an accident and got a payout, and a clawback yesterday due to a forced sale after a death. Why is it I have to wear it?
  • JOE BROKER | 21 Mar 2014, 12:58 PM Agree 0
    Clawbacks came in to "compensate" the banks after Deferred Establishment Fees were outlawed, for the up-front commissions paid right? ok so if that's the case why not apply them on a pro-rata basis rather than this 100% impost within 12 months for example? it's too fair and doesn't make the bank enough money!
    there is another model where Clawbacks are made redundant, and no-one's out of pocket: get the whole margin that's funding the up-front commission paid as all trail, in other words, zero up-front year one, bigger trail for the life of the loan. If only brokers would wake up to that, and stop getting involved in all this up-front commission /clawback /churning/ controversy circus , and build up their business with a serious trail income. unfortunately very few can see this which is why they're "buying" what's presently being "offered" to them. of course FBAA and the likes could better educate them about such possibilities if they chose to. Bottom line: Paradigm shift
    t
    there is another model
    There is another
  • Susan | 21 Mar 2014, 01:02 PM Agree 0
    @Peter White...when you wrote that us brokers need to do our part as well....what ideas did you have for us brokers to do???
  • oldBroker | 21 Mar 2014, 01:20 PM Agree 0
    @JOE BROKER. Zero upfront and bigger trail would not work for the industry. There would be no new broker entrants as they would starve before their book got big enough. It's only fine for the established brokers.
    @Tim H. I agree that Bankwest is probably the fairest out of the lot. But if we look at this issue deeper, the lenders are using another party (brokers) to mitigate their own risk and that is unjust and should be challenged.
  • Rex | 21 Mar 2014, 01:42 PM Agree 0
    @Susan, one answer wud be to charge a fee. Fees wouldn't be affected by clawback. Clients would welome disclosure and you wouldn't have the problem of justifying a fee and/or have the issues that @Michael has in tryig to charge retrospectively.

    Fin Advisers suffer clawback on services cancelled or changed in the same way.

    If commsion from the bank is going to be the means of payment, then like any company paying commission you will suffer clawback.

    No commission no clawback. Simple really.
  • mac | 21 Mar 2014, 01:48 PM Agree 0
    @Rex..Fee for service...forget it...if that becomes the only way to get paid our industry would be finished in less than 12 months. We have it good the way it is! Clawback is crap but its better than the alternative.
  • Denise Brailey BFCSA (Inc) | 21 Mar 2014, 01:59 PM Agree 0
    Brokers need to notify the Banks they are now going to give a copy of the Loan Application Form to all intended clients at point of signing. They will then start listening - guaranteed! That protects you from internal bank manipulation so it makes sense. Then write to the Bankers and tell them 100% claw backs are unacceptable as the work was generated in the first place and each part of your job has a value. That "a man shall be paid for work done" (women too I may add). Since you generated the work it must be paid for. If all Brokers did this in unison the Banks would have to take notice. The Bank has to take the risk as they are the manufacturers of the product.
  • SIDBROKER | 21 Mar 2014, 02:12 PM Agree 0
    SIMPLE SOLUTION. All it takes is for one smart lender to drop clawback and then we support them until the rest get the message.
  • Denise Brailey BFCSA (Inc) | 21 Mar 2014, 02:14 PM Agree 0
    Yes Joe, spot on, the Aggregators only to protect the Bank's position if loans sour, yet they reap big benefits for doing little work and placing an add in paper to recruit more brokers. This hug cost is passed on to consumers. Industry needs to do away with middlemen. Pay those who do the work in good faith. 97% of Brokers decent people we agree.
  • Rex | 21 Mar 2014, 02:31 PM Agree 0
    @Mac - I think we'll have to disagree on that score. If the business is based on fees, in part or in full, then it's protected against the potential for future loss in clawed-back revenue. It also allows for a much greater share of wallet.

    The lenders are currently paying the 'piper' so I guess they call the tune.

    The arrangement is after all commercial so if the contract is 'unfair' then just don't use them, but doesn't that then introduce bias based on 'commission'... and wasn't that where this discussion started?

    The second alternative is work for the lender directly [and exclusively], get a salary... and no clawback

    The third is to simply factor the potential for clawback into the business and and build it into the business process/cost/fee/structure. This is after all a business decision.

    Re-frame the debate; exactly how much business is lost due to churn, client/broker relationship breakdown, poor recommendation, unavoidable circumstance?

    Make clients stickier, avoid them thinking about moving, get a greater share of wallet, place the business where you choose, outlive the claw-back time frame.
  • Michael eberand | 21 Mar 2014, 02:40 PM Agree 0
    I am going to write to MFAA and put them on notice that as a member I expect policy and strategy to be implemented to support us on this growing issue.

    If I do not get a reasonable reply AND action not lip service within a reasonable time frame, I will look to cancel my 15 year MFAA should FBAA or other be prepared to formally do like wise .

    Can I ask all MFAA brokers to do the same ?
  • Denise Brailey BFCSA (Inc) | 21 Mar 2014, 02:45 PM Agree 0
    Little birdie just told me: dropped recommending C Banks to her clients months ago.... it was proving too hard to meet the sales targets to remain on CBank books..
    Basically it meant 80% of her “recommendations” to her clients needed to go CBanks way. Now if all banks do this how do the brokers cope with this type of pressure?
  • Rex | 21 Mar 2014, 02:47 PM Agree 0
    A very interesting, lively and relevant debate, but it seems very skewed towards maintaining the status quo of being paid by the banks.

    Whilst I note @Peter White that a broker has the 'right' to present anything that is not unsuitable, what about the obligation to provide the client with the optimum/most appropriate/best holistic outcome?

    Where is "clients' best interest" in this discussion?

    If the broker relationship is with the client, then this discussion is moot.

    If the broker relationship is with the lender [the entity that is paying] then see Rule #5.
  • Steve McClure | 21 Mar 2014, 03:09 PM Agree 0
    I don't believe they are fair, but business isn't always fair when you have to maintain a profit per deal. We as brokers try to do that, so lenders have to do that. A waiver of clawbacks would simply open the floodgates to refi's etc. and lenders would then recoup transaction losses by some other means. We aren't so naive as business people to think that wouldn't be the case are we?

    A remedy would be for lenders to quit making lead losses, i.e. stop absorbing all the set up costs at the start (nil app fees etc.) then putting the onus and loss on the broker in the case of early repayment. If a client pays app fees & set up costs (like they did in the "old days"), they are less likely to refinance or change lenders for at least a couple of years.... a much more realistic user pays system than just the broker copping it. Lenders benefit, because their own branch loans are less likely to leak away too. Yep, I know, problem is they won't all do it.

    It's not an easy one, so make a business decision yourself, be creative and build in a clause like Tim H's in these comments & be realistic on this whole matter.
  • Rex | 21 Mar 2014, 03:17 PM Agree 0
    @Denise, the story you present is one of an individual with a supplier/agent relationship with the lender and upset with having targets.
    So in making the "recommendations" you allude to she is actually selling, or in this case not selling, the lenders products.
    I would ask you where is the client best interest in this relationship. Is the lender the best one for the clients? Or simply the one that doesn't place targets on the broker?
  • oldBroker | 21 Mar 2014, 03:33 PM Agree 0
    Forget the associations... their vested interests are too great. What is needed is a young enterprising lawyer who can commence a class-action. This is a very winnable thing, and there should be plenty of legal eagles frothing at the mouth to go after the banks on this issue. Does this mean that if clawbacks are judged illegal that the lenders will not try to mitigate risk in other ways? No. But clawbacks are a scourge on the broker industry and need to be challenged.
    Great set of comments... enjoyable reading.
  • Broker | 21 Mar 2014, 04:06 PM Agree 0
    If the Lenders had any decency at all, a clawback could and should be waived with the presentation of a contract of sale , as this would clearly demonstrate that it is NOT any fault of the poor Broker, so why penalise the innocent and expect them to put hours of labour into the process for free?

    IT STINKS
  • GC | 21 Mar 2014, 04:06 PM Agree 0
    Before you start a class action work out what the unintended consequences are likey to be.

    What are the repersussions from the banks? Who has the deeper pockets?

    Think before you leap gentlement.

    While this is a fairly heated argument. My simple advice is that if you cant stand the heat - get out of the kitchen.
  • Thinker | 21 Mar 2014, 04:24 PM Agree 0
    So we've all had enough, but what can we do, especially when we have to keep writing business to make a living?
    Here's one idea, (or fantasy;)
    Members of "ABC" aggregator lobby them into writing the following letter;

    "
    Dear XYZ MAJOR Bank

    Our members have asked us to notify you that you are herewith suspended from our lending panel pending a review of your clawback policy that is satisfactory to our members."


    We can still do business with all but one lender. They will lose 50% of their home loan business overnight. How long before they change? And when they do every other lender goes on notice - 30 days.
    The question is which bank should be made to suffer when all banks are guilty.
    My answer would be the major with the worst clawback policy.
    2 years clawback after no trail in year 1.

    Suppose I can dream
    Marcus


  • Denise Brailey BFCSA (Inc) | 21 Mar 2014, 04:33 PM Agree 0
    I agree with oldBroker, stimulating discussion and it is obvious this problem has been festering for some time. When Brokers are presented with contracts and unfair clauses they do not understand re the long term consequences. It is clear the claw backs are a blight on the overall structure. The first Lender to banish these clauses would benefit enormously in the long run. As Brado said "not a single broker out there who thinks clawbacks are fair" especially where refinancing is going on. Lenders offer to refinance as soon as the predictable default occurs. Customers are kept in the dark by the Lender. Approvals are carried out by Lenders not Brokers.
  • Denise Brailey BFCSA (Inc) | 21 Mar 2014, 04:38 PM Agree 0
    What is best for the customer is more transparency and I realise Brokers are asking for the same thing. Now that's reasonable. The quota system is just to hard for many brokers and consumers suffer from this problem including families of brokers. I know a few.
    The most important thing is the discussion being placed on the table, I would have thought.
  • Country Broker | 21 Mar 2014, 04:58 PM Agree 0
    Clawback to me are a form of restrictive trade, if we have client dying and divorcing we cannot stop the discharge . In the case od churning , if the deal from the bank is good enough in the first two years the client will stop the churn any way . It really stops brokers from exercising theuir right to trade freely and as such the MFAA should have ACC looking at the terms of all aggregator/ broker agreements. Do the banks claw back commissions they pay their home loan lenders if the deal pays out inside two years I DOUBT IT .
  • Tina | 21 Mar 2014, 05:00 PM Agree 0
    Another argument to demonstrate unfair practice. I was hit with a clawback as clients received poor customer service from my aggregator/mortgage manager. Also I recently put a client to Bankwest and he immediately wants me to refinance him as he thinks they are idiots, luckily I managed to talk him into waiting until after the clawback period due to what Bankwest will do to my income. Why is it that the Fair Trading Practices Act will protect small business against unfair terms and conditions imposed by larger corporations yet we are the victims of such unfair terms and conditions. Is it because we have been seeking help from the wrong departments.
  • oldBroker | 21 Mar 2014, 05:05 PM Agree 0
    @GC. We are now over 50% of all mortgages and, more importantly, brokers are the single largest source of new business for lenders. We have power now.
  • Steve McClure | 21 Mar 2014, 06:18 PM Agree 0
    Here's a suggestion. Lenders can't charge early termination fees, but maybe they can pass a broker clawback fee to the client - because its not their own charge, its compensating the broker. You might jump up and down and say that discriminates against broker introduced loans, but isn't it better than you copping a clawback?

    Its much better than the status quo and if a client doesn't go with you for that sole reason, then they were a clawback waiting to happen. This has actually been happening with equipment finance for the past 40 years and the industry thrives. I've never had an EF clawback. Give me a call if you want to write some EF.
  • Michelle Matheson | 21 Mar 2014, 08:19 PM Agree 0
    I am a victim of mortgage fraud perpetrated by my bank- not my broker- My lender is doing their utmost to blame the broker, it was not his doing at all, he is a very recent professional -
    I have started this petition in a hope of generating awareness for all Australians to check on their mortgages before they too end up homeless , this situation is putting elderly persons and families out on the street, literally!!
    Please take a moment to have a look at this and if you support my plight for a Royal Commission into the banking sector for the sake of all of us please sign and circulate - time for consumers and brokers to get a fair go and to stop the greed stricken big 4 projecting their actions of fraud onto hard working honest Australians.

    https://www.change.org/en-AU/petitions/australian-government-royal-commission-into-banking-sector?recruiter=44087500
  • Working4Free | 23 Mar 2014, 09:03 AM Agree 0
    I found the Bankwest supportive comments interesting. We have had a clawback by stealth recently. Fixed part of a current clients loan and the trail stopped. When asked why we were told it was a new loan and that the new trail clause (no trail first year) came into effect. Great new loan then pay us upfront. No we will give you $300 as a "good faith" payment. Refused; you can't buy our integrity. Aggregator knew of new policy but didn't/still hasn't told it's "members". They said they will follow it up. It's been several months still waiting to hear. So beware of clawback by stealth by Bankwest and relying on your aggregator will only bring disappointment.
  • Judge/Jury/Executioner | 24 Mar 2014, 09:35 AM Agree 0
    ANZ clawed me $10k !! The client wrote a letter in my appeal saying it was mainly their crappy branch service that made him return to his previous lender after 10mths...ANZ got to judge the case and simply said NO...my aggregator had no balls and no real vested interest...how can the bank be the judge/jury and executioner on my appeal when they stand to profit? I have never churned their loans which my book proves, but will now consider looking for better offers for my ANZ clients in case they too don't like their service and decide to move...
  • Peter Argeetes | 24 Mar 2014, 10:08 AM Agree 0
    Simple. if a broker does the work he/she gets paid. What happens after that should not be an issue. Payment relates to work done which could be over a years work. There should not be a clawback. In the Banks branches there's no such thing as a clawback (they don't reduce the personal lenders salary if a loan repaid/refinanced)
  • Incognito | 24 Mar 2014, 10:35 AM Agree 0
    It's a heated argument but i can see both sides.

    A good compromise is 50% clawback in the first year.

    We need something for our work, even if it doesn't work out.

    Most do work out
  • Rex | 24 Mar 2014, 10:37 AM Agree 0
    There is a simple answer, don't write any business that is still inside 'clawback timeframe'. That way you won't be prejudicing a fellow brokers revenue by triggering the clawback provisions.
  • Peter | 24 Mar 2014, 11:03 AM Agree 0
    LOL Rex, new to the industry? Finance waits for no one my friend.
  • Denise Brailey BFCSA (Inc) | 24 Mar 2014, 11:53 AM Agree 0
    Loans written by Bank Officers has crept up to 36% of market share in mortgages. Its the 67% that are picking up the tab as I understand it, causing many to rethink having to work a month for nothing as deductions are made, if morale is down then good people leave the industry.
  • Working4Free | 24 Mar 2014, 12:32 PM Agree 0
    Why not a flat fee? Loans $1M and under say $500 and $1M and over say $750.
  • oldBroker | 24 Mar 2014, 12:35 PM Agree 0
    As I predicted... not a single comment from an aggregator on this critical issue. They jump all over trail portability but remain silent on this issue.

    Does everyone understand why no aggregator has commented, nor can/will comment? Does everyone understand why you will get no action from an aggregator regardless how unjust clawbacks are? Does everyone understand why a change in clawback policy would be an aggregator's worst nightmare?

    I can see the aggregators now... peeking at this article and comments from underneath their desks, hoping it will just go away.
  • Glenn | 24 Mar 2014, 12:45 PM Agree 0
    No comments from any lender either....
  • Susan | 24 Mar 2014, 01:07 PM Agree 0
    Does anybody know the number of broker originated loans that are refinanced to that of branch originated??? It would be interesting. I would be surprised if there is much difference, however we are being penalised. Does anybody know the numbers???
  • Denise Brailey BFCSA (Inc) | 24 Mar 2014, 01:09 PM Agree 0
    No doubt Aggregators will be choking in their weeties. Why so silent? Lenders say that "most Low Docs are settled within 3-5 years?" On a 30 year loan? So how long do claw backs go on?
    Also ask the Major Banks why is it the credit assessor NSR is 1.1, and same calculator for brokers has 1.4957 or thereabouts? Is this pushing up the failure rate and clawbacks are the lenders guarantee?
  • Denise Brailey BFCSA (Inc) | 24 Mar 2014, 02:00 PM Agree 0
    In 2013 Commissioner told me "refinances" are finished now. Does this comment answer your question? There was a great deal going on as we suggested, not in consumers or brokers' best interests at all. We have evidence its still happening. Major Banks propping up each others "in need of more buffer" loans and re-setting up further buffer monies and lines of credit. Were clawbacks implemented on these loans initially generated by the Broker? We have consumer documents that show the trail.
  • Michelle | 25 Mar 2014, 05:40 AM Agree 0
    Imagine the out cry if a branch loan was lost in the first two years and the bank clawed back the pay of the staff member who processed the loan! The out cry would be gigantic.

    Now I know we are not staff and receive on going trail, but I don't think I'm too far off the mark.

    I recently experienced clawback when a client sold their property at 22 months after settlement as they were having a baby and decided to move back to live with family.
    Now I sure did not orchestrate that!
  • Rex | 25 Mar 2014, 09:19 AM Agree 0
    @Michelle, the answer is simple really, charge the client the fee for the work and there is ony the opoortunity for commercial redress or clawback.
    Find me one commission role based on successful sales/acquisitions whcih does not have some form of clawback.
    If you work for the banks then they call the shots, and by accepting payment from the banks/lenders, you work for them. In any commercial sense they are your clients. You operate as the banks agent.
    When you don't accept their money... then you can take the moral highground.
    Till then factor in the clawback as a business risk/expense and hope you manage to put off getting roped into the Financial Services legislation whirlwind.
    When you're required to produce statements of advice, adhere to clients best interest test, avoid conflicted remuneration etc, that's a whole different landscape.
    You have escaped FOFA for now, but it won't be long. This conversation was had by financial advisers in 2003/3 and is still heard even today.
    If you can't survive without money from the banks, rethink your business model-it has a finite lifespan.
  • Maclane Johnson | 25 Mar 2014, 10:42 AM Agree 0
    The Solution is SIMPLE. Clawback from the client, if they discharge their loan in the clawback time. Its their loan, and they Must bear the consequences of their action with their loan.
    Put a clawback clause in your broker agreement.
    I have and it works a treat. 2 months ago it flushed out a client who had intentions of making a quick profit on a property by buying and selling quickly. I explained the clawback clause to him, as I do with to all clients. He thought it was fair enough that I get paid for my work. I explain it to them, and the reasons, I ask them to read it, and then initial it. I have only lost one deal in the four years I have used it; And that was to an Indian gentleman. But that's better than me doing the work and having a clawback and not being paid for my work and expertise. SO, THE SOLUTION IS SIMPLE, PUT A CLAWBACK CONDITION IN YOUR BROKER - CLIENT AGREEMENT. Ultimately its the clients responsibility to pay for the work, not the banks and not the brokers.
  • D | 25 Mar 2014, 10:55 AM Agree 0
    clawback clause obviously you don't want repeat business because if I was a client going to your broker firm I would next time intend to go to the bank as why should you put a restriction on what I can and cant do when I sell my home
  • Marty | 25 Mar 2014, 11:10 AM Agree 0
    Not if you refund your clawback or waive it if doing new business with the client
  • Maclane Johnson | 25 Mar 2014, 11:19 AM Agree 0
    Marty - Could you Please clarify your comment, I don't understand it.
  • Only one | 25 Mar 2014, 12:12 PM Agree 0
    'Advantedge' has only a 50% clawback from day 1. Seems the only one that believes that the risk should be shared.
  • marty | 25 Mar 2014, 12:17 PM Agree 0
    @ maclane. My agreements have a set clawback fee of $700 BUT it is also stipulated that if the client does new lending with me within 3 months of the clawback I will either waive the $700 or refund it. FYI I have had this clause for 2.5 years an have charged the fee once on about $50 mil of new loans. I have also lost one deal because of it but that's business you don't want anyway!
  • Peter | 26 Mar 2014, 09:46 AM Agree 0
    Just a suggestion. If the lenders are worried about churning, then fair enough. Why cant the have a clawback model structured that if THE BROKER is refinancing the client, then claw it back. This can be tracked via the broker understanding that they should notify the lender that they are in control of the refi, or have their systems compare who did the loan previously. I am sure you get the picture. if the client sells the property (unlikely within the clawback period after just refinancing or settling a new loan) or leaves the lender (again, unlikely unless the broker does not know his lenders and is not putting clients into a competitive loan) then the lender should leave the commission as it was. If they understand that we introduce a client and that when commission is clawed back we will not just lose the commission, that now that loan has COST us money. It should be a two way street and the first aggregator and lender that take this road are surely going to benefit a lot without putting a great deal of risk on the lender at all. It is time for them to be a little bit fairer when we are supplying loans that have the bulk of the work done. Hopefully one of them will at least see the point here and actually make a move to help. They do advertize a lot how they are here to "support our broker channel". We need more than just words.
  • marty | 26 Mar 2014, 10:11 AM Agree 0
    @ Peter well said!! You have summed it up.
  • TonyM | 26 Mar 2014, 10:27 AM Agree 0
    In 8 yrs of broking I have had 2 clawbacks. I work hard to get my client the "Best" loan for them and that makes them stay. Both clawbacks, I made another upfront elsewhere because the clients came back to me when their circumstances changed.
    Charging this clawback to my client is really a break cost and break costs have been ruled unconscionable by ASIC.
    My contract includes a small service fee to cover my outgoings payable if they make any deliberate changes to their loan (including re-financing) that result in a clawback of my commissions. This fee may be avoided if they contact me to discuss the matter first and this is clear in the contract. This gives me an opportunity to help them fix whatever problem they are having that causes them to be looking at their loan again so quickly.
  • Mark | 26 Mar 2014, 10:54 AM Agree 0
    Tony M what happens when a couple from Overseas decides after 18 months to go back home? again the Broker gets clawed back, the whole point of this argument is to defend and try to resolve our Profession from Clawbacks occurring under any circumstances,
  • Sharryn | 26 Mar 2014, 04:04 PM Agree 0
    clawback on churning only. the banks know if its a refinance or sale.
  • SEQ BRoker | 28 Jul 2014, 10:14 AM Agree 0
    Brilliant,

    I just had a client receive a cash inheritance. They paid out their Construction loan but still hold a loan against the land as I did it in 2 separate loans.
    So Major bank not only doesn't pay me trail for a year now charges a claw and still holds my client.
    Gee we are bent over a desk as brokers.
  • Andrew Edwards | 29 Jul 2014, 08:52 AM Agree 0
    I HATE getting enquiries from savvy investors who want to buy property and flip it in 6 months when I know there will be a claw back.

    What's the point? You do all this work for nothing.

    I have a client who buys and flips properties every 6mths and he has been coming to me for 8 years. I have done around 15 loans for him and made zero upfront commission.

    What am I meant to say? Please go somewhere else I don't want your business??
  • iMac | 29 Jul 2014, 10:50 AM Agree 0
    Andrew, you are working for nothing. Have you never thought of charging him a fee ? You are just being used and abused.

    And TonyM: There is a difference between a 'break cost', or penalty, that banks used to charge, and an 'economic cost' the brokers charges client when 'clawed back'. These have a different basis for calculation, and different intent. Otherwise the brokers works for nothing, and that definitely IS unconscionable, and not ASICs intention.
  • Ed Ridge | 29 Jul 2014, 12:29 PM Agree 0
    Well said iMac.
  • Andrew Edwards | 30 Jul 2014, 08:35 AM Agree 0
    imac - our company policy is to not charge any brokerage so my hands are tied. Then I get hauled over the coals for not reaching target! I can't turn around and say to the client "please go somewhere else". Hopefully I will get some business from him that sticks.
  • Jimbo | 07 Mar 2016, 12:35 PM Agree 0
    I to have been a victim of clawback which is a sore point for all brokers. Being a small percentage it still hurts. All of these have been out of my control. like a client selling a property without purchasing as their circumstances have changed or the bank not living up the expectations of the client and of course we are a reflection of that as we introduced them to the business. I also had cases of the client needing a change and the existing bank was not able to assist due to policies, valuation etc, therefore we are working twice as hard for the same pay but better than nothing. I believe there is a basis for clawback as the banks are not a charity but a business but so are we the brokers. We commit a lot of time and resources only for it all be taken away. There is mention of having an agreement with the client to pay the clawback but why should the consumer suffer when they decide to change as sometimes its also out of their control as well and the banks cannot decide an equable agreement and will only push to the client to go directly to the banks. Perhaps it is the answer but how do you enforce that if the client decides they do not want to pay.
    Therefore we should be looking at the profit margin that a bank makes from a deal. When we get hit with clawback especially in the 1st 12 months we lose 100% plus our costs to setting up the loan but the banks surely make some profit from the transaction but how much I do not know, the question have never been asked. Only they would have access to their break even position and should be more transparent.
    Possibly clawback should be restricted to 50% of the upfront in 1st 12 months, unless there is churning involved but without knowing the banks position as per above its only a guess. Most of the time we are not aware of a discharge until after the fact. The lender does receive a discharge form and if its with the same broker then the clawback should be warranted. The lender should also advise the broker of potential discharge when an authority is received so we have an opportunity to either save the deal of redo the business. Im not sure if their privacy allows this but should be incorporated in the privacy if not to protect both themselves and the brokers business, after all we are suppose to be a partner in business.
  • SEQ Broker | 09 Mar 2016, 10:23 AM Agree 0
    Hi Everyone. it is within our power to effect change. I had one lender basically admit they use clawback as revenue raising because lender costs to produce the loan have now become so low that after 6 months they are profitable. So the lenders use brokers for income. Not surprising.

    How about this. Lets pick a lender and from June 1 no loans go to that lender from any broker until they clarify their clawback position. The only way to effect change is by way of economics. Lets see a big bank lose 52% (or is it 56% now) of their business and try to keep the clawback model. Once they submit to the change the rest will follow suit.

    Can you imagine a head of a bank trying to explain to the media why brokers have deserted them - and trying to justify it. no i cant either.

  • Renata Lines | 26 Sep 2016, 05:04 PM Agree 0
    Clawbacks are evil, how many other workers get their pay taken off them for work which has been done 12 months ago. this was bought in by the labour government when banks were told not to charge clients exist fees, exist fees have been charged for years prior.. Its amazing how the big banks never miss out, but a ordinary Broker has to pay, so the banks don't miss out. Clawback should be reviewed, if a Broker churns a loan, but 99% of brokers do not do that.
  • Leanne | 17 Oct 2016, 11:23 AM Agree 0
    I am appalled that Clawbacks are even allowed. I have only written one loan which took a great amount of my time. My client has now decided to sell his property and pay out his loan after 6 months. I am unable to pay the Clawback as I have had no income and what I received from my commission was utilize to keep my business alive.
  • Gehan Gunasekera | 02 Nov 2016, 09:14 AM Agree 0
    I am a long term broker (13 years plus 33 yrs in the Banking Industry). Clawback is a reasonable proposal if this happened say 3 to 6 months after initial drawdown, and full clawback only if full loan was paid out. I recently suffered a clawback from ANZ for a loan drawn in May '16 and client asked that loan be split a month later to 10% variable and 90% fixed. Over a period of three months client paid out the variable component from proceeds of wedding gifts. ANZ immediately clawed back 100% of the commission, despite retaining 90% of original loan, Credit Cards and off set facilities, as well as savings accounts, and this from a Bank that we have strongly supported over a number of years. Our protestation appears to have gone unanswered. BDM advises that he has referred the matter to the Commissions are to no avail. So brokers be aware, that despite NCCP requirements to keep in touch with clients to ensure that their product choices are being met, in this instance ANZ certainly do not appear to support that requirement.
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