Several lenders have recently moved to tweak their clawback policies in the past few months, with mixed reactions. This month we ask… How do you think clawback can be more equitable?
A staged approach
A SYSTEM that reduces the percentage of clawback monthly or quarterly over a period of time, rather than calculated annually or at the two-year mark, would be a fairer outcome and could see the clawback at that point in time around the 10–20 per cent mark, rather than 100 per cent.
Currently with a number of lenders, if a client refinances after 20 months, a broker could lose all their commission.
This content is available exclusively to
The Adviser premium members.
A number of these early refinances are out of control of the broker or even resulting from poor service from the lender and this solution ensures the brokers are rightly paid for the work they completed initially introducing the business to the lender.
Now that most lender incentivised refinance, cashback offers are being scaled back. Hopefully that allows lenders to concentrate on rate pricing and retention of current customers, helping reduce clawbacks.
Simon Visser, Grapevine mortgages
Abolish it after 12 months
I BELIEVE clawbacks should be abolished completely; what other occupations have the risk of losing income for work completed in the previous two years?
There must be a compromise and brokers treated more fairly.
There are circumstances that are beyond our control as to why a loan is repaid in full within a two-year period, such as relationship breakdowns, loss of employment, illness or death, and an insurance payout being received to pay out the loan.
I would propose that after 12 months, clawback should not apply. If within the 12-month period the broker could demonstrate that any of the abovementioned circumstances occurred, then they would not incur a clawback.
If the loan was refinanced to another financial institution and the broker demonstrated they attempted to retain the client, then no clawback would apply.
Peter Sorgel, Yellow Brick Road – Aspley
Update discharge forms
I THINK that it’s really unfair for anyone to have to pay back their income after all of the work that goes into writing a loan. Imagine this scenario: after building a house, the builder had to pay back 100 per cent of the income because the person sold their house or it burned down – not a fault of the builder. It’s a similar picture, as broker’s deals can take hours and even days, but, through no fault of our own, money is pulled back.
I lost around $45,000 of income last financial year from clawbacks and I paid income tax on all of that income, too.
One suggestion would be that lenders change their discharge forms that would require who wrote the loan. For example, the broker’s name or banker’s name must be disclosed and if the same broker refinances it in 12 months’ time, then and only then do they claw back.
Jen Hughes, Mortgage Choice
Reduction on clawback term
THERE SIMPLY needs to be a better way of lenders working with brokers as their lending/business partners. For example, where a 100 per cent clawback is deemed essential, perhaps 100 per cent less a flat fee of $500 so that the broker has had at least some remuneration for their time.
I am completely against straight-line clawbacks, especially within the first 12 months. Lenders like Bankwest that gradually scale these back are a much fairer system for both bank and broker.
Some lenders have recently increased their commission structure, however, I would personally like to see a reduction on the clawback term, especially with solution-based lenders, where we may be placing the client for a shorter time until their circumstances are resolved.
Scott Beattie, Cube Central
What do you think? Let us know in the comments below!
