'They get hit with a bill and they hate you': Jon Denovan on clawback dos and don'ts

by AB29 Aug 2013

Attitudes towards charging clients clawback fees may be changing, but brokers still need to be fully aware of their legal obligations in order to avoid client – and regulator – push-back, Gadens partner, Jon Denovan, tells BrokerTV.

“I think there’s a changing view about the ethics of getting clawback from borrowers. You must remember that before buyers were liable to pay deferred establishment fees, or exit fees.”

While deferred establishment fees have now been outlawed, borrowers still don’t have to pay major establishment costs, argues Denovan, meaning somebody else is subsidising it.

“And the person who is subsidising it is the lender - if the loan runs long enough - or you if it doesn’t run long enough…So it’s only fair that you should be able to claw that back.”

However, Denovan stresses that transparency is crucial, as is ensuring that you meet your legal obligations.

“…Charging for clawback is exactly the same as charging for commission and if you’re dealing with regulated loans, to charge commission to borrowers, you have to have a thing called a ‘quote’. That has to be signed by the borrower before you provide credit assistance. So the timing is important. It’s no good having it as an afterthought – it needs to be done before you suggest or arrange a specific loan for the borrower.”

To watch the full interview with Jon Denovan, CLICK HERE

COMMENTS

  • by Neil 29/08/2013 10:28:49 AM

    Please clarify - how can you provide a quote upfront prior to providing "credit assistance" if you don't know what "credit assistance" you are providing - product, rate and lender etc?

  • by Old Joe 31/08/2013 5:56:42 PM

    Jon thanks for this information . Will a terms of trade agreement clearly pointing out that the client can be charged for the clawback and also that the client signing the agreement before proceeding with a broker and also will this comply with the Consumer and Competition ACT 2010. I want to know is why does our industry of all industry seem to be the ONE industry that can not do this and how does our industry differ from any OTHER industry under Consumer Law. Last time I checked as long as we are fair and reasonable the magistrates should see that we are as transparent as we can be , no one is trying to stiff anyone. In fact a leasing company charged me a breakout fee because I payout my lease before the 48 months agreement .

  • by mac 2/09/2013 10:51:09 AM

    @ Neil....Note the fee in your credit guide (given when it becomes apparent you will be providing credit assistance) then include the fee in your "Quote and credit proposal disclosure document" along with the product specifics and commission disclosures etc.