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