ASIC tight-lipped on clawbacks

by 26 Mar 2014
Corporate watchdog Australian Securities and Investments Commission is keeping schtum on the clawback debate.
An article last Friday on clawbacks generated huge feedback from brokers, who overwhelmingly decried the conduct and advocated change.

Some brokers recommended taking business elsewhere, or writing a clause for the client to cover the clawback cost. Others suggested a petition to protest the practice, and called for help from industry associations, aggregators, and ASIC.

When contacted by Australian Broker, an ASIC spokesman referred to a 2012 ASIC report, as the regulator’s position on clawbacks has not changed.

In the report, ASIC looked at factors which could increase the likelihood of a bank’s early termination fee – prohibited after 1 July 2011 – being declared ‘unconscionable.’ 
These included fees that did not reduce over time, were calculated by reference to the loan amount and, crucially, did not account for clawbacks of broker commissions due to the termination of the loan.
Interestingly, the report found less than 1% of consumers who were charged an early termination fee made a complaint.
Banks rolled out clawback policies following the GFC to recoup costs in the event of premature refinancing. 

Clawbacks are allowed to happen under the Australian Competition and Consumer Act 2010, regulated by the Australian Competition and Consumer Commission.

The ACCC website says: "Unconscionable conduct is generally understood to mean conduct which is so harsh that it goes against good conscience.

Under the Australian Consumer Law, businesses must not engage in unconscionable conduct, when dealing with other businesses or their customers."

But broker Maria Rigoni said she believes anyone reasonable would consider clawback against 'good conscience' – not least becasue many aggregators are affiliated with banks.

"The introducer broker via the aggregator system has made lenders complacent and lazy. Over the past 13 years more and more responsibility to make sure an application results in a settlement has been burdened upon the broker. The workload has increased and the remuneration has decreased," she said.

"It is both the lender and the aggregator jointly who are holding brokers to ransom as the remuneration and clawback agreement is between them."

Clawbacks: ‘We are definitely open to discussion’

Clawbacks 'not okay', says broker

Hot topic of the week: Clawbacks



  • by Patrick McMenamin 26/03/2014 10:33:15 AM

    Has anyone actually read Regulation 79A. Neither "credit fee" nor "charge" are defined in the Regulations, so these terms take their ordinary meaning and are therefore would be interpreted with a broad meaning by the Courts. It appears that nothing in the Regulations suggests that such fees or charges are restricted only to fees or charges levied against or payable by the consumer. Note the generality of 79A(1)(b) "it is [a credit fee or charge] to be paid on or in relation to the termination of the credit contract". I suggest that clawback of commission resulting from early termination of a relevant credit contract is captured by the prohibition. Again it is appropriate to ask: "Why has there been no effort on the part of MFAA/FBAA and/or aggregators to explore and confirm the meaning of Reg 79A and if it is general, as I suspect, to take action to have the regulation enforced against lenders in breach?" As the payment of commission, as required, is disclosed in the credit contract, the existence of such commission payment and therefore any clawback is integral and related to the credit contract.

  • by Jenine 26/03/2014 10:42:11 AM

    Which aggregator does not support clawbacks?

  • by Country Broker 26/03/2014 11:01:18 AM

    I am a broker and I am amazed that ASIC as the regulator have been asked to comment on "clawbacks" , They regulate credit and credit advice . Clawbacks are part of a commercial contract our aggregators have entered into with a lender. Nothing to do with a "fee" charged to the consumers. As it is the ACCC are more likely to become involved not ASIC . If the industry can prove that the behaviour of the lenders who are charging claw backs is predatory behaviour, Unconscionable conduct , or anti competitive ( which is most likely the case) especially if a lender charges a claw back on a loan they have rewritten ( think ANZ and CBA policy) , then the lender would need to the investigated by the ACCCC not ASIC. Clawbacks to me are just plainly wrong , predatory and anti competitive.
    The only way they will stop is for the MFAA and FBAA to bring pressure to bear on the lenders, and for Brokers to say to the aggregators who are owned by the banks , your parent needs to stop this behaviour or I ma going elsewhere. It is a brokers decision as to who thye aggregate with and to who they place deals with as far as lenders go.
    It will only take a couple of lenders to stop this behaviour and the rest will follow.