The broking industry is determined to push through changes to clawback arrangements, after successfully negotiating amendments to the net of offset payment period.
Earlier this week, Commonwealth Treasurer Josh Frydenberg revealed that after taking into account industry responses to its recent consultation on the upcoming best interests duty for brokers, the Morrison government has decided to extend the net of offset payment period from 90 days to 365 days.
Treasurer 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 Finance Brokers Association of Australia (FBAA) and the Mortgage & Finance Association of Australia (MFAA) welcomed the government’s decision, stating that it was a sign of the Coalition’s commitment to working constructively with the broking industry.
However, FBAA managing director Peter White has told The Adviser that he is hoping the government would consider further amendments to the National Consumer Credit Protection Amendment (Mortgage Brokers) Bill 2019, including revisions to existing clawback arrangements.
In the weeks following the publication of the government’s bill, industry leaders called on policymakers to align clawback periods employed by lenders with the net of offset payment period.
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.
However, the FBAA’s Peter White has said he will push for a halving of the maximum clawback period to match the government’s newly proposed net of offset payment period.
“The clawback discussion isn’t over yet as far as I’m concerned. It’s still part of our discussions with Treasury and my discussions with the Treasurer,” he said.
“We’ll see how that plays out, but I think the [net of offset and clawback periods] should be the same.
“I think clawbacks should be extinguished after 12 months.”
Mr White echoed the sentiment of Loan Market executive chairman Sam White.
“Our belief is that net of offset should mirror clawback provisions,” the Loan Market chairman said.
“If it is good enough for banks to claw back the money over two years, it should also be good enough to increase the upfronts over that same time period.”
Connective director Mark Haron, AFG head of industry and partnerships development Mark Hewitt, and Mortgage Choice CEO Susan Mitchell have also previously stated that they would lobby for changes to clawback arrangements.
“We think clawbacks, in [the current form], are unfair on brokers, so this is the part that we need to put forward to both government and Treasury, and if necessary, [to] the Senate,” Mr Haron said.
However, despite acknowledging concerns about existing clawback arrangements, Aussie Home Loans chief customer officer David Smith 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 interests 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.”
The federal government is expected to table its best interests duty bill in Parliament before the end of the year.