The aggregators have responded to a renewed push from industry stakeholders to reform clawback arrangements.
During a webinar hosted earlier this week by mortgage aggregator Connective, director Mark Haron revealed that he would use the consultation process for the newly proposed best interests duty – which concludes on 4 October – to fight for reforms to existing clawback arrangements.
Among the proposed measures in the government’s National Consumer Credit Protection Amendment (Mortgage Brokers) Bill 2019 is a move to limit the period in which commissions can be clawed back from aggregators and mortgage brokers to two years.
The bill would also prohibit the cost of clawbacks being passed on to consumers.
Mr Haron said that such arrangements are “unfair”, particularly in light of recent remuneration reforms, which restrict the payment of upfront commissions to the loan amount drawn down by a borrower (rather than approved).
The Connective director proposed that upfront commissions only be clawed back when brokers are the cause of the termination of a credit contract with a lender.
Mr Haron joined the likes of Mortgage Choice CEO Susan Mitchell and managing director of the Finance Brokers Association of Australia (FBAA) Peter White in expressing support for an alternate clawback model.
Aussie Home Loans and the Australian Finance Group (AFG) are the latest industry stakeholders to weigh in on the debate.
Aussie’s chief customer officer, David Smith, acknowledged concerns over existing clawback arrangements but encouraged stakeholders not to lose sight of the industry’s main objectives.
“While clawbacks should be fair and equitable for brokers, this shouldn’t get in the way of what’s most important, which is achieving good outcomes for customers and implementing an effective and workable best interest duty,” he told The Adviser.
“This is what we should be focusing on as an industry, and we wouldn’t want anything to impede this progress.
“Aussie is continuing to engage with government and the Combined Industry Forum to make sure that any changes to regulation will support both customer and broker outcomes.”
However, AFG’s head of industry and partnerships development, Mark Hewitt, backed Mr Haron, Ms Mitchell and Mr White’s calls for clawback reform, adding that AFG would be working with policymakers to reach a solution.
“I told our brokers [about a month ago] that I thought the clawback provisions at the moment were too blunt and that AFG supported [a] fairer way of applying [clawbacks],” he said.
Mr Hewitt expressed support for both the alternate model proposed by Mr Haron and the “graduated” model proposed by Ms Mitchell, the latter of which would reduce the proportion of the clawed-back amount as the clawback period progresses.
“We’re working on some different scenarios, which we would hope to present as part of our submissions,” he said. “I think there is scope for both [models].”
Mr Hewitt said that, like Mr Haron, he believes a push for a more equitable clawback structure is justified in light of the recently introduced “net of offset” provisions.
“We think there’s probably some ability to work here with the lenders to offset some of that loss by adjusting some of the way clawbacks are applied,” he said.
The consultation period for the federal government’s proposed reforms is currently open, with the new provisions scheduled for implementation by 1 July 2020.
[Related: Aggregator head to fight for clawback reform]
Charbel Kadib is a journalist on The Adviser and Mortgage Business.
Before joining Momentum Media in 2017, Charbel held roles with public relations agency Fifty Acres, and the Department of Communications and the Arts.
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