A wave of broker commentary in response to the government’s consultation on unfair trading practices has revealed growing frustration over clawbacks and channel conflict.
Brokers responding to the Finance Brokers Association of Australia’s (FBAA) submission to the federal government consultation on unfair trading practices have said that clawbacks have drifted far beyond their original purpose, leaving brokers exposed to borrower behaviour and direct‑channel strategies.
In its submission to Treasury’s consultation on unfair trading protections for small businesses and franchisees, the FBAA urged the federal government to rein in lender practices it described as unfair and anti‑competitive.
The association said that clawbacks were initially designed to discourage misconduct but now often arose due to borrowers refinancing or selling, with brokers stripped of their commissions even when they had met best interests duty (BID) obligations.
The FBAA also criticised net‑of‑offset commission structures, slow commission payments, and internal incentive schemes that encouraged lenders to reclaim broker‑introduced loans.
The submission prompted a strong response from readers, many of whom said the issues outlined closely match their day‑to‑day experiences.
“Banks have always treated brokers poorly. Clawbacks and differential pricing are just two of the tools they use to do this,” one reader said.
“Clawbacks, as far as I am concerned, are unfair and no other Australian goes to work for no reward apart from brokers.
“Time to change this unfair practice.”
Clawbacks seen as incompatible with BID era
Several readers linked clawbacks to the introduction of BID, saying that current clawback settings were incompatible with the obligations brokers now carried.
“It would be good to see some traction on clawbacks, which are illegal anywhere else, but for the finance broker,” one commenter said.
“Given the time it has taken, and the real cash grab from banks, it should be retrospective to when BID came out, as that is when the playing field changed and brokers were mandated to do the right thing for consumers.”
Others focused on how clawbacks intersected with lender economics, with one reader saying that acquiring loans through intermediaries was cheaper for banks than relying solely on direct channels.
“The cost of getting a new loan to a bank is very high and if the loan gets originated through brokers it costs less to banks,” they said.
“Clawback is very unfair and brokers have done their work. In many cases bank do not lose anything. Clawback should be stopped and the government is turning a blind eye.”
They went on to call for collective action and said: “It’s now time for aggregators to take some drastic action and start blacklisting some banks and encourage smaller banks.”
Yet not all placed complete responsibility on lenders, with one reader saying that borrowers should share liability when their decisions triggered clawbacks.
“When a consumer chooses to refinance out of current lender or sell a property within the clawback period, they should be liable for the clawback,” the commenter said.
They further said that brokers should be able to recover clawback costs directly from clients where arrangements were transparent.
“There is no other industry which consumers have this completely free privilege,” they said.
“Brokers should be allowed to recoup clawback from clients in these cases as long as clear disclaimers and agreement is made at the start of the application process.”
Calls to protect competition and broker independence
Many readers tied clawbacks and channel conflict to the core purpose of the broker model, seen in a commenter reflecting on why brokers work under aggregator structures, emphasising the importance of independence.
“The purpose of brokers working under an aggregator model was to enable brokers to focus on delivering the best possible outcome for their clients by comparing products across multiple lenders, rather than being incentivised to direct business toward lenders based on volume expectations or commercial arrangements,” they said.
They said that the health of the sector relied on preserving that principle.
“A healthy mortgage broking sector depends on maintaining genuine choice and competition. Practices that pressure brokers to favour particular lenders risk diminishing consumer choice and moving away from the principles on which the broker industry was built,” the commenter said.
One commenter, meanwhile, said the current environment felt like an intense contest between banks and the intermediary channel.
“It is open warfare from the banks, majors particularly, with the exception of Macquarie. NAB is particularly repugnant. Two-tier pricing and branch and customer service white anting is rife,” the reader said.
They also raised concerns about accreditation stability and said: “I’d like to write business with CBA but their unilateral efforts to cancel accreditations every couple of years means I can’t put customers there in fear that I will be separated from them at some point.”
Another commenter highlighted the strain when restructures and remedial work generated no revenue.
“Sometimes you have to do restructures which generate no income. We become free processing labour for the banks at these times,” they said.
They said that remuneration rules no longer reflected a fair balance of risk and reward.
“The commission system is broken and banks are really not playing a fair game,” the commenter said.
“Unfortunately, we are price takers but I would like to see a code developed around commissions and channel conflict which is much fairer than it is now.”
Some defend clawbacks as part of value sharing
While most readers backed the FBAA’s critique, one reader urged caution about the unintended consequences of abolishing clawbacks altogether.
“Be careful what you wish for – our model is based on economic value creation and sharing. No value – no share,” they said.
They drew on a review of broker businesses to say that clawbacks and net of offset had not exploded in scale.
“My review of over 130 broker businesses in the past 2 years reveals clawback averaging around 5 per cent of revenue and net of offset around 10 per cent same as what they were 10 years ago,” the commenter said.
“These costs need to build into a brokers business plan and then the appropriate client engagement strategies implemented to reduce the risk of early loss.”
The controversy of clawbacks
While many lenders updated their clawback policies in 2023 to shorten the term to 18 months, and move to a pro-rata structure, brokers have argued that more could be done.
Earlier this year, Treasurer Jim Chalmers responded to a broker petition calling for the cancellation of clawbacks – insisting that amending the existing system “raises complexities” and framing the government’s position as a deliberate balance between consumer protection and market stability.
“Broker commissions are ultimately a commercial matter for negotiation between brokers and lenders and, subject to the existing regulatory framework, the government does not prescribe situations in which such arrangements should be entered into," he wrote at the time.
“The clawback arrangements entered with each credit provider may vary and have adapted over time, driven by market competitive pressures and a desire by lenders to attract referrals from brokers.”
Charlmers emphasised that clawbacks were a tool to ensure ongoing compliance with the Best Interest Duty, and that abrupt cancellations or refunds could undermine deterrence, create confusion, and destabilise regulator expectations.
“Removing clawbacks could lead to adjustments in overall commission structures, potentially reducing the upfront or trailing commissions brokers receive or increasing costs for consumers. Similarly, retrospective refunds would require altering commercial agreements and introduce uncertainty for lenders and brokers,” he said.
[Related: Clawbacks under fire as FBAA slams lender tactics]
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