The Westpac group, Auswide Bank and Adelaide Bank have confirmed that they will continue to pay trail to brokers whose customers opt to defer loan repayments under COVID-19 support packages.
As many lenders offer customers support packages to customers impacted by the ongoing coronavirus (COVID-19) pandemic, including by offering loan repayment holidays, there had been questions raised as to how trail commissions would be treated under these arrangements.
Following on from APRA’s statement that banks need not treat repayment holidays as arrears, commentary from credit reporting agencies that hardship arrangements are typically not reported as defaults, and a message of support from the Australian Banking Association – lenders have begun revealing their position on how they will be treating trail commissions under these circumstances.
The Westpac group (including Westpac, BankSA, Bank of Melbourne and St.George Bank) has confirmed that they will continue to pay trail to brokers under their hardship packages.
In a message to brokers, the bank stated: “We are here to support you and your customers and have processes in place to assist customers who are facing hardship as a direct result of the impact of COVID-19.
“In circumstances where repayments are deferred as part of our COVID-19 relief measures, your trail income will not be impacted and will continue to be paid as part of your normal monthly commission entitlements.”
The group stated that it also recognised that many broking operations are small to medium-sized businesses, and is “looking at other relief options to support you, should your business’ conditions change”.
Likewise, Auswide Bank’s head of third party, Tracy Field, emphasised that the bank “is a strong supporter of the third-party channel and the significant contribution it makes to mortgage lending in Australia”.
“We also understand that the majority of our broker partners are small-business owners and will be facing uncertainty and financial challenges of their own, while trying to reassure and assist their customers,” she said.
“The landscape ahead of us is certain to be ever changing, particularly over the next six months. Where customers seek assistance under our COVID Customer Support package, Auswide Bank will continue to honour trail payments on loans under these six-month deferred payment arrangements,” Ms Field added.
It is expected that the bank will continue to review the position after this initial period.
“Our intention in making this decision is to provide some level of reassurance to our broker partners so they can continue to support their customers as we all navigate through these rapidly changing times,” Ms Field concluded.
Adelaide Bank has also said it would continue to pay brokers trail for loans with repayment deferrals.
Head of third-party banking, Darren Kasehagen said: “Trail will continue to be paid for loans where customers have taken up the option of a deferral of repayments for up to six months as part of Adelaide Bank’s assistance package in response to people affected by the COVID-19 pandemic.”
Trail will also reportedly continue for BOQ and Virgin Money brokers where a customer accesses relief due to COVID-19.
The updates follow hot on the heels of the announcement made by non-bank lender Pepper Money, on Monday (23 March), which was the first lender to confirm that it will continue to honour all trail payments for customers affected by COVID-19 until at least 31 December 2020, regardless of whether a customer goes into hardship or not (terms and conditions apply).
It is expected that many lenders will take this position on trail commissions, with more announcements from lenders expected later this week.
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.
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