One of the mortgage broking industry’s peak bodies has called for the major banks to reform the practice of ‘unreasonable’ clawbacks after they posted increased profits.
The FBAA said it considers clawbacks unreasonable and unfair because mortgage 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 Peter White said 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,” Mr White said.
“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,” he said.
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 broker's fault if they decide to refinance with another broker and another lender.”
Mr White said more brokers should speak up with the FBAA against the practice and make lenders more accountable.
[Related: FBAA welcomes greater transparency]
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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