A veteran mortgage broker and former CBA employee believes clawbacks are an “underhanded way” of preventing brokers from making lenders accountable for inefficiency and poor service.
In her submission to the ABA review into retail banking remuneration, which the reviewer reportedly decided not to publish, Melbourne-based broker Maria Rigoni expressed her frustration with commission clawbacks.
“The lender practice of tearing back of aggregator (so mortgage broker) business turnover paid for a completed contracted task is an unfair, dishonest and sanctioned by ACCC, ASIC, and APRA,” Ms Rigoni said.
“The practice of clawback was originally suggested by APRA as a way for credit providers to deter mortgage managers from writing bad loans. Today clawback is an unethical risk management tool. The banks claim taking back hard earned aggregator (so mortgage broker) business turnover is a way to stop ‘churn’. A nonsense term invented to disguise loss of loans from their books due to borrowers refinancing,” she said.
According to Ms Rigoni, banks are currently offering cashback rebates to borrowers to ‘churn’ loans. She argues that banks use clawback to take an “unfair financial advantage” of aggregators and mortgage brokers.
“The commercial risk of new business not liking its after sales service, interest rate creep/hikes, competitor offers, or other valid customer loan payout reasons, is transferred from the bank to the contracted introducer,” Ms Rigoni said.
“It is an underhanded way to stop mortgage brokers and borrowers being able to make lenders accountable for inefficiency, bad service, interest margin creep, beneficial competitor offers, without the mortgage broker business being put into a financial loss situation. The only entity that wins out of this malpractice is the banks.”
Earlier this week, The Adviser ran excerpts from Ms Rigoni’s submission in which she accused the Sedgwick review of supporting “cartel behaviour”.
The FBAA, which accused the banks and the ABA of “regulatory manipulation” through the Sedgwick report, has repeatedly called for the termination of clawbacks.