Most lenders are holding their tongues on their justification for clawbacks, but one non-major has said it is willing to discuss change.
broker national manager Stewart Saunders said the bank is guided by what brokers want and is “definitely open” to discussion around the structure of commissions and subsequent clawbacks.
He said when ME Bank came into the market, two decades ago, it followed the industry status quo on clawbacks and commissions. The bank takes back 100% of broker commission in the first 12 months and 50% in the first 18 months should the client take their loan somewhere else.
Clawbacks cannot be talked about in isolation as they are intertwined with upfront and trail commission – and when the lender pays the broker upfront commission it is money not yet received from the client over the life of the mortgage, Saunders said.
“What brokers need to understand is the bank’s paying that commission prior to receiving the income from customers. It’s only fair to clawback when banks haven’t received any income.”
Currently aggregators and brokers have indicated they want an upfront and trail commission structure of income, but if there is significant kickback from the industry, lenders should think about changing this, Saunders said.
“If it is something brokers want to change I recommend speaking to aggregators so we can have a consolidated discussion of what needs to be done about an alternative structure.
“We are definitely open to discussion around the structure of commissions. But we need to have a consolidated feeling from aggregators as to which direction to take.”
Australian Broker asked 15 lenders about their position on clawbacks, why they introduced them, whether they could come up with an alternative which would allow cost recovery while still acting fairly towards brokers, and whether they would consider limiting their clawbacks in future.
St George, ING
, Pepper and Citibank
all declined to comment.
Commonwealth Bank and Resimac
indicated they would respond in due course. Others have not responded.
Future Financial general manager Troy McLachlan said his company has never introduced clawbacks for brokers and instead covers the cost themselves.
“If a reasonably small mortgage manager can offer this in the market and maintain strong profitability, I ask why other lenders in the market cannot offer no clawback or even an option [or] model in between what is currently on offer?”
However, McLachlan said brokers must consider when placing business to lenders who have zero fees and extremely low rates “or fancy marketing campaigns”, that the lenders have to cover the costs of these promotions somewhere.
on Friday generated huge feedback from brokers, who overwhelmingly decried the conduct and suggested change.
Clawbacks 'not okay', says broker
Hot topic of the week: Clawbacks
ASIC 'reminds' banks to acknowledge clawbacks