With the big banks announcing increased profits during the latest reporting season, the Finance Brokers Association of Australia (FBAA) believes the major lenders should reform the practice of what it believes to be “unreasonable” commission clawbacks.
FBAA considers clawbacks as unreasonable and unfair because home loan brokers are self-employed contractors who have little recourse against lending institutions who ‘claw back’ their income if their loans are refinanced by a bank without them knowing.
FBAA Chief Executive Officer Peter White says while the reporting season shows Australia’s banking sector remains robust, there is room for lenders to consider supporting brokers who contribute greatly to their bottom line.
“Our brokers tell us they are steadily losing commissions because many customers are opting out before the 12 month or two year clawback agreement is up due to refinancing.”
“Brokers now write more than half the new loans in the marketplace and are a pivotal part of a bank’s business and it is time they are correctly rewarded for their efforts and not punished.”
Mr White concedes in certain situations clawbacks are appropriate, especially when the customer refinances through the same broker by way of churning.
“You have done your job and got paid for your effort – Why should your money be taken away 12 months or more down the track? It is not the brokers fault if they decide to refinance with another broker and another lender.”
As a collective, Mr White argues, “more brokers should speak up with us against the practice and make the industry lenders more accountable”.