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FBC clawback provisions difficult to enforce

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Australian Broker | 18 May 2011, 06:00 AM Agree 0
Brokers who write clawback provisions into their Finance Broking Contracts may face difficulty enforcing them, Gadens Lawyers has said
  • Keith Bridges | 18 May 2011, 12:10 PM Agree 0
    Big words coming from a big city law firm!. I can't imagine Gaden's refunding professional fees should a customer's dealings in the future go sour based on work they did less than 2 years ago. Clawbacks are a real risk in our business, and failure to address this wisely going forward will have an adverse impact on your business.
  • petert71 | 18 May 2011, 12:13 PM Agree 0
    I'm wondering if it is going to be legal to charge a clawback related fee. An article recently stated that DEFs removal has been integrated into the NCCP. "Regulation 79A prohibits a credit fee or charge in a credit contract entered into on or after 1 July 2011 to be paid on, or in relation to, the termination of the credit contract..."
    Given that FBC clawback provisions are directly related to the termination of a credit contract, this suggests brokers may not be legally allowed to charge clawback provisions.
    If it is legal, enforcement is simple. Send the customer an invoice with a copy of the FBC highlighting the fee. When they don't pay (and most won't), send them the various reminders and late notices, then refer it to a debt collector.
  • Sarah Eifermann | 18 May 2011, 12:13 PM Agree 0
    Completely agree with you Keith!
  • oldBroker | 18 May 2011, 12:22 PM Agree 0
    Clawback provisions in a FBC is the death of the broker market. Why would I use a broker and potentially fork-out thousands of dollars because circumstances force me to sell my house after a few months (family illness, job changes, etc.). Whereas I can go to a bank with no such provisions.
  • Aaron Greffenius | 18 May 2011, 03:48 PM Agree 0
    An interesting last comment. I wonder if lawyers might not be so flippant about the 'bugger all' clawbacks if their fees were similarly clawed back. I'm sure they would be satisfied just as long as they had done such a good job the clients came back to them. Right? Why not do two deals and get paid for one? I'm sure any lawyer worth his or her salt wouldn't mind this if they are telling brokers they shouldn't mind. I'd love to hear the uproar if something so unfair was proposed to be written into legislation.
  • Ozboy | 19 May 2011, 07:46 AM Agree 0
    We have had this clause in our contracts for over 3 years, we have enforced it three times and each time the client paid within 10 days of being notified. We spend a lot of time explaining why it is charged and when as well as putting it in writing. It is all very clear and transparent right from the start and in each circumstance the client admitted it is was in their control, if we had a situation where it was due to a family tragedy etc we would not enforce it. A little common sense will go a long way.
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