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Pepper confirms trail stance for COVID-19 loans

by Annie Kane11 minute read
Pepper confirms trail stance for COVID-19 loans

Pepper Money has become the first lender to publicly announce its position on trail commission payments to brokers for those impacted by COVID-19. 

Following on from the Australian Banking Association’s (ABA) announcement last week that its members would suspend principal and interest loan repayments for distressed small-business customers for six months (with several lenders, including non-banks, offering repayment holidays for mortgage borrowers, too), questions have been raised around how trail would be treated on loans with deferred repayments.

Non-bank lender Pepper Money has now confirmed that it will continue to honour all trail payments for customers affected by COVID-19 until at least 31 December 2020, regardless of whether a customer goes into hardship or not (terms and conditions apply). This position will be reviewed after this date. 

According to Pepper, this move - which relates to trail on both mortgages and commercial loans - was taken to “ensure brokers are not also impacted during these difficult times”.


“Pepper Money has always supported the broker channel, and by making this decision, we are providing brokers with the support and certainty they need in these difficult times so that they aren’t impacted also,” Mario Rehayem, CEO of Pepper Money, said.

He added: “While we know most broker’s concerns have been for their customers first and foremost, Pepper Money has taken a proactive stance on this issue in order to provide comfort and certainty during this difficult time for brokers who will also share the same concerns as their client base. 

"In making this decision, we are keen to ensure that brokers can continue to provide answers and guidance to those impacted communities wherever possible.”

It is expected that many lenders will take this position on trail commissions, particularly given that credit reporting agencies have already outlined that the hardship arrangements are typically not reported as defaults, and therefore do not impact a borrower’s credit score, with APRA also stating this week that banks need not treat repayment holidays as arrears.

APRA outlined: “Many banks have recently announced COVID-19 support packages that provide affected borrowers with an option to defer their repayments for a period of up to six months. These packages have mainly been offered to small business and home loan customers. 

“Where a borrower who has been meeting their repayment obligations until recently chooses to take up the offer not to make repayments as part of a COVID-19 support package, the bank need not treat the period of the repayment holiday as a period of arrears. 

“Similarly, loans that have been granted a repayment deferral as part of a COVID-19 support package need not be regarded as restructured,” the regulator said.

It added that it will be writing to all authorised deposit-taking institutions to advise them of the specific reporting treatment for loans subject to these support arrangements. 

The ABA told The Adviser on Monday that its bank members were “conscious of the fact that brokers are small businesses in their own right and will require support” and would confirm their approach on issues around face-to-face requirements and commission arrangements for brokers this week.

[Related: Lenders to announce COVID-19 trail policy]

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