Clawbacks 'not okay', says broker

by Calida Smylie21 Mar 2014
Brokers should band together and industry associations should support them in the fight against unjust commission clawbacks, a broker and former head of an industry body believes.

Maria Rigoni, former head of the Australian Institute of Professional Brokers, was driven to speak out about clawbacks after she was unexpectedly clawed back $2,674 last week for a loan settled on 7 June last year.

The long-term client told Rigoni there had been no relationship fallout but it worked with their business plan to refinance with another lender.

Clawback is unjust as most loan introducers are self-employed contractors who have no industry body or law that protects them against “powerful, greedy big businesses”, who knowingly take unfair advantage because they can, said Rigoni.

“The remuneration contracts are masqueraded as payment for ‘the introduction of new business’ but are really a manipulated way of not paying for marketing and outsourced loan writing tasks.”

Rigoni thinks brokers should be canvassed to see how many want clawbacks banned and for lenders to reveal how much they have clawed back from brokers in the past 12 months.

“That really would be an interesting figure to see. Currently lenders are taking an unfair advantage because they know we have no negotiating position.”

Part of the problem is brokers have no support to help them challenge clawbacks, Rigoni said.

“It’s not okay, but how can you protest when the people in this industry refuse to help? Industry bodies and government regulatory bodies should be shaming the lenders. They either don’t understand or don’t care.

“The banks will say it is ‘industry standard’, the MFAA and FBAA will say they ‘cannot interfere in commercial agreements’, the ACCC and ASIC will say ‘the broker willingly completes the tasks knowing clawback is part of the deal’, and Fair Work Australia does not cover sub-contractors,” she said.

MFAA chief executive Phil Naylor said the association has done a lot of work on the longstanding issue in the past.

“All aggregator groups were surveyed in 2011 to identify the incidence of clawback – their response was that it is minimal,” he said.

In 2012 MFAA issued a statement to members on its position on clawbacks, and this position has not changed.

“…the view of the MFAA National Brokers Committee is that clawback issues should be resolved between the aggregator/broker group, on behalf of the broker, and the individual lender. 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,” it said.

FBAA chief executive Peter White said clawbacks are only appropriate when churning is taking place, otherwise the lenders are punishing the broker for circumstances outside their control.

It is important brokers stand up for their rights and make a noise about unfair clawbacks, he said.

“You’ve done a certain job, you’ve got paid for that job – why should your money be taken away 12 months down the track? It’s not the broker’s fault if they decide to refinance with someone else.”

However, FBAA cannot do anything apart from talk publically about unfair clawbacks as it is a commercial agreement where associations have no legal standing to act, White said.

“People power – that’s what it needs. Brokers should publically speak up about it. And your biggest power is just to take your loans elsewhere.”

Meanwhile, Rigoni said she “feels like a worn out record” every time she talks about clawbacks, and also thinks it is time for brokers to be proactive in campaigning against the practice.
"The industry needs to be made accountable for this unfair, unjust business practice."


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  • by Brado 21/03/2014 9:14:48 AM

    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.

  • by Dave Robinson 21/03/2014 9:15:16 AM

    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'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.

  • by Xavier 21/03/2014 9:28:27 AM

    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