Do banks profit from clawback? Assistant Treasurer asks

He reiterated that the ALP has committed to leaving broker remuneration alone, however, he suggested that the issue of clawbacks was potentially something that needed revisiting.

Mr Jones said the FBAA managing director, Peter White, had been “in [his] ear constantly since the election and wanting to raise with [him the issue of] remuneration” particularly in regard to clawback.

The Assistant Treasurer said: “I understand that it takes a lot of effort, a lot of work, a lot of hours in establishing a loan. And if one of your clients moves their mortgage from one bank to another within two years, the bank is automatically clawing back — sometimes the majority of a commission payment. 

“That means mortgage brokers bear the cost.

“There’s all sorts of contractual arrangements between brokers and lenders — and the government would be very slow to want to intervene unless there was something completely [wrong]… [but] in my discussions with Peter [White], I have said that I’m interested in whether the money that has been clawbacked is greater than the bank’s cost in establishing the loan in the first place.”

While he emphasised that there was no policy decision being taken on this at present, he said that if there was evidence that the banks were, in effect, making money from clawback, there might be a reason for the government to look at it.

FBAA managing director Mr White told broker members that the association had been conducting research into the issue earlier this year and would continue to do so.

Indeed, the association has found that the average annual clawback value per annum to a broker had surged by 47.4 per cent over three years, from $10,229 in 2018 to $15,077 in 2021.

Mr White highlighted that brokers were increasingly finding themselves exposed to clawbacks, given the ongoing cashback offers being handed out by lenders at the moment.

FBAA research has previously found that lender cashback incentives had risen by 59.1 per cent between 2018–21, but the issue had been escalating recently as lenders compete for refinancing borrowers in a rising interest rate environment.

Mr White flagged that some lenders were offering sizeable cashback incentives to those refinancing — in some cases (as ubank announced this week) — up to $6,000.

He said he believed that the financial services minister was “very, very much across the issues around clawback” as the association had been providing him with research on the matter.

Mr White told brokers that it was “unfair” that, “for the first two years [after a broker writes a mortgage], someone has their hands in their pocket”.

“The question is, are the banks actually making more, are they profiteering, from clawback?” Mr White summarised, adding that the association would continue to research the matter and provide data to the Treasury regarding it.

The FBAA MD said that this issue as well as issues such as education reforms, point of sale exemptions, the relevance of comparison rates, discharge tactics from banks’ retention teams, and net of offset were also on the discussion list with the Assistant Treasurer.

In conclusion, the Labor MP thanked brokers for their role in helping Australian borrowers navigate a changing economic environment.

Mr Jones said he wanted to “acknowledge the really important role brokers play — all 17,000 of you — in assisting Australians manage mortgage and credit stress”.

“One study shows that about 70 per cent of all home loans are written through a mortgage broker. That’s a testament to the great value you provide to your clients; testament that, day in day out, you are working in the best interest of your clients to get them the best outcome,” Mr Jones said.

[Related: Labor open to discussing clawback]