Clawback a ‘constant problem’ amid rising rates

The contentious issue of clawbacks for brokers is going to be a “constant problem” in such an escalating yet potentially fluctuating arena for interest rates as borrowers continue to shop around for the best deals, he explained.

“This issue of clawbacks is more prevalent in the current environment of rising interest rates where people are going to be constantly looking to try and get a better deal as rates continue to move — and they will continue to move until the end of this year and possibly into the first quarter of next year,” Mr White said.

“I’ve been opposed to it from day one. It goes back a long time, but it’s become a major issue in the current environment.”

The FBAA leader’s comments come after The Adviser spoke exclusively to him about ongoing challenges brokers face and recent borrower perception of turnaround times, as highlighted in independent research firm Momentum Intelligence’s annual 2021 and 2022 Consumer Access to Mortgages reports.

The 2021 results showed 61 per cent of proprietary channel customers were satisfied with approval speeds, while just over half (53 per cent) of broker customers were satisfied. However, in 2022 the results showed an improved 70 per cent of customers were satisfied with both bank and broker approval speeds.

“I think the thing that the industry has to understand is none of this is new — and it’s very difficult to get away from it because it’s not new,” Mr White said of turnaround times, channel conflict and clawbacks. 

“It’s a matter of how we manage what we do. We must keep the pressure on the banks to play fair with everybody.”

Maintaining appropriate levels of competition

On the issue of turnaround times and the previous result to current, Mr White said: “If [ever] banks provide a better turnaround time on a direct channel while providing the same service to brokers, are they deliberately trying to disadvantage them [brokers]?

“You kind of hope that’s not the case, but the reality is if they can do it on one hand, they should be able to do it on both.

“I would expect that wherever that’s occurring … there should be equal opportunities provided and ensuring that appropriate levels of competition are maintained between the channels, given we’re writing the majority of the business anyhow.

“I can’t understand why any bank would disadvantage the broker channel in regards to turnaround times — it doesn't make sense to me.”

Explaining the unexplainable

When The Adviser asked what sort of feedback and commentary the FBAA had received about the type and frequency of such occurrences, Mr White explained that unfortunately, the FBAA gets such broker concerns too regularly during the association’s monthly focus groups.

“It's not an uncommon conversation where a broker is processing the loan and, all of a sudden, the bank intervenes out of nowhere and the branch is underwriting the deal — and doing it at quite a fast speed to what they can get done through the broker channel.

“When banks do these things, they’re actually disadvantaging the borrower, not just the fact they’re pissing off the brokers. Obviously, no one’s happy about it, but you got a client that’s being messed around. You can’t blame the client.”

Mr White noted that the majority of Australian borrowers are dealing with a broker for a reason: “brokers are the ones that have stepped up to the plate delivering this service”.

Going forward with CDR

Despite ongoing challenges with clawbacks, Mr White predicts broker market share will continue to grow as open banking CDR becomes a core focus in 2023. 

“Broker market share will start to step up quite solidly compared to the already solid growth it’s been through. We’ve been predicting this since 2016 and we’re now on the ticking clock with the open banking systems coming to fruition.

“As we go to open-banking CDR sites it will be a huge benefit to brokers — and it will actually take that human intervention piece out, so you won’t have bank retention teams suddenly getting on the phone out of nowhere trying to retain the client.

“It’ll be a great thing for brokers; we just have to make sure the integrity and the ethics that’s employed by everyone is above reproach.”

[Related: https://www.theadviser.com.au/compliance/40822-final-clawback-regulations-released]