Corporate watchdog Australian Securities and Investments Commission is keeping schtum on the clawback debate.
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."
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Hot topic of the week: Clawbacks