The FBAA has warned that clawback practices are spiralling beyond misconduct, dragging brokers into costly channel wars.
The Finance Brokers Association of Australia (FBAA) has urged the federal government to rein in what it described as unfair and anti‑competitive behaviour by lenders in its submission to Treasury’s June 2026 consultation on unfair trading practices protections for small businesses and franchisees.
In its submission, the FBAA said that most broking enterprises operated as small businesses and sat squarely within Treasury’s focus on business‑to‑business unfair trading conduct.
The consultation is seeking examples of practices that disadvantage small businesses ahead of new laws banning unfair trading practices, which are due to commence from 1 July 2027.
FBAA CEO Leo Gagic said that “a broker’s livelihood and ability to function is inextricably linked to credit providers”.
In setting out the association’s objectives, Gagic said that the FBAA was aiming to restore a balanced three‑way relationship between lenders, brokers, and consumers.
Clawbacks and net of offset at the centre of concerns
The FBAA said that clawbacks were originally intended to prevent brokers from engaging in misconduct, yet noted that many current formulations were now triggered by borrowers’ choices – even when the broker had fully complied with their obligations.
Gagic took particular issue with lenders that justified clawback on the basis of their internal cost calculations.
He said some institutions “base clawback calculation around the notion of cost recovery” and labelled this approach as “unfair and inequitable”.
The submission further criticised net‑of‑offset arrangements, under which commissions are calculated on the loan balance after offset funds are taken into account.
The association said that this could significantly erode income where borrowers actively used offset accounts to manage interest.
It said the manner in which these provisions were being implemented in practice was “shocking”.
The association also linked slow commission payments to wider policy settings on small business cash flow.
It said that lengthy payment cycles ran counter to the expectations embedded in the Payment Times Reporting Act, stating that “slow payments of commission offend the general principles of fairness which are reflected in the expectations set by government”.
Channel conflict and direct‑channel incentives
The FBAA also devoted substantial attention to channel conflict, saying that lender efforts to grow direct business were fuelling behaviours that chipped away at trust in third‑party distribution.
The submission pointed to internal incentive structures and differential pricing policies that it said actively encouraged staff to reclaim loans originated via intermediaries.
“The desire to build direct channel is causing poor marketplace behaviour including incentivising internal staff to poach and refinance deals originally introduced by third parties, differential pricing whereby a lender will offer an additional rate discount to a customer originally introduced by a broker if the customer refinances through a branch (triggering clawback against the introducing broker in the process) and misrepresentation to customers about the cost of broker commissions increasing the rate they pay,” Gagic said.
Unqualified introducers and ‘repugnant’ accreditation cancellations
The paper further delved into introducer and referral programs, contrasting the obligations imposed on licensed credit businesses with the payments made to unqualified referrers such as accountants and lawyers.
The FBAA said that the Hayne royal commission found defective introducer arrangements caused significant consumer harm, yet added that lenders continued to remunerate introducers without subjecting them to clawbacks or similar consequences.
To underline the competitive concerns, the association linked the treatment of introducers and regulated licensees to anti‑competitive outcomes in the intermediary market.
“The separation of allowing unqualified people to introduce customers for a substantial fee free of clawbacks and other consequences is resulting in anti-competitive behaviours and unfair outcomes against regulated small credit licensee businesses,” Gagic said.
On accreditation practices, the FBAA accused some lenders of using minimum‑activity thresholds to cull brokers in ways that aligned with distribution strategy rather than consumer protection.
He described the actions of lenders cancelling accreditation of brokers who did not meet minimum requirements as “repugnant behaviour” that was “more about consolidating direct business over third party channel than protecting consumers”.
[Related: MFAA touts 10-day discharges as productivity fix]
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