CEO rejects ‘one size fits all’ clawback push

Mr Frydenberg told the 900-strong audience at AFG’s Next conference that the revision would “allow brokers to be more fairly remunerated for the funds that they arrange”.

The industry largely welcomed the government’s decision. However, some industry stakeholders called on policymakers to consider further amendments to the National Consumer Credit Protection Amendment (Mortgage Brokers) Bill 2019, including a move to align clawback periods employed by lenders with the net of offset payment period.

As it stands, the federal government’s bill proposes to limit the clawback period to two years and prevent brokers from passing on such costs to their clients.

With the net of offset payment period now extended to 12 months, stakeholders, including the managing director of the Finance Brokers Association of Australia, Peter White, have called for the clawback period to be capped at 12 months.

However, speaking to The Adviser, CEO of non-bank lender Liberty Financial James Boyle said clawback arrangements should be assessed based on the characteristics of a credit contract.

“In our opinion, it should be a function of the nature of the loan and the relationship, and there should be no one size fits all [arrangement],” he said.

Mr Boyle welcomed the government’s decision to extend the net of offset payment period but rejected its purported relationship to clawbacks.

“What net of offset was about was really reacting to an issue that was identified in ASIC’s work on the mortgage broking industry about two or three years ago,” he added.

“I think clawbacks are a very different topic.”

Mr Boyle’s comments followed the release of Liberty’s full-year results for the 2019 financial year (FY19).

The bank posted a before-tax profit of $94.1 million, up 12 per cent from $83.9 million in FY18.  

The improvement in the non-bank’s underlying earnings was underpinned by a 24 per cent increase in its loan portfolio, which grew from $10.2 billion to $12.7 billion.

Over the course of FY19, Liberty issued $4.7 billion in asset-backed and senior unsecured securities.

According to Liberty’s chief financial officer, Peter Riedel, residential mortgages make up approximately 70 per cent of Liberty’s loan book, 90 per cent of which are prime home loans and two-thirds of which are for owner-occupiers.

Mr Boyle said the FY19 results reflected the “power of Liberty’s distribution capability and networks”.

The Liberty CEO also noted the non-bank’s efforts to diversify its product offerings, which included the introduction of a small-business product that does not require real estate as mortgage security.

Mr Boyle added that Liberty was looking to further enhance its product range to provide brokers with more solutions for their clients, making particular reference to its investment in subsidiary MoneyPlace.

Looking ahead, Mr Boyle told Mortgage Business that Liberty would continue to support the broker channel as the industry navigates through regulatory reforms.

“We will continue to stand side-by-side with brokers and make the case that the broking service is a very positive thing for consumers of financial services in Australia, and that brokers by and large have done very good things for their customers,” he said.

“I think brokers have been vindicated in the time since the royal commission with regards to the positions of legislators and regulators pertaining to brokers.”

[Related: Brokers help bolster Liberty’s bottom line]