AMP Bank changes commission structure

The changes, which also include tweaks to trail and upfront on some products, will be effective for residential home loans that are settled from 1 January 2025.

Stepped clawbacks

AMP will move from its current clawback structure for residential home loans (100 per cent clawback in the first 12 months of the loan and 50 per cent for the following six months) to a gradual and proportional reduction in the clawback over the 18-month period.

The new clawback structure will be:

• Zero – 3 months after settlement: 100 per cent.

• 4–18 months: Staged – drops by 5 per cent every month.

• 19 months onwards: 0 per cent.

The bank has said the changes come following industry and broker feedback and intend to deliver a more balanced and equitable clawback approach. For example, loans that currently discharge on the 12th month would be fully clawed back, whereas under the new structure, it would be 55 per cent.

Trail reduction

In order to fund the incoming clawback structure, the company will be tweaking its trail commissions for AMP Bank residential home loans, trimming the trail from 0.17 per cent to 0.15 per cent (plus GST).

Some upfront changes

In addition, AMP Bank will be increasing the upfront commission for its Select Package (only available to eligible corporate super members and AMP Limited shareholders) from a base of 0.30 per cent to 0.60 per cent.

However, electronic lodgements (which make up nearly all of AMP’s applications) receive an additional 0.05 per cent on the upfront, taking the upfronts to 0.65 per cent.

Speaking of the changes, Paul Herbert, AMP Bank’s head of lending & everyday banking distribution, said that the changes had been brought in after feedback from broker and aggregator partners.

“After extensive consultation with the broker community and industry bodies, we believe this new framework strikes the right balance for brokers and customers,” he said.

“It recognises the critical work brokers do upfront to educate and support clients in securing loans that suit their personal circumstances, and which can have a material financial impact. Importantly, the move to stepped clawbacks also reflects the reality that client circumstances often change in the early years of a loan.

“We remain committed to advocating for fair, transparent, and consistent commission frameworks across the industry, recognising the crucial role brokers play in maintaining a healthy lending market for consumers.”

Associations welcome move

Noting the change, the managing director of the Finance Brokers Association of Australia (FBAA) Peter White AM said: “While I don’t want to overstate these advances, and acknowledge there are still mountains to climb, neither should we as an industry take these gains for granted,” he said.

“Every small change is a change for fairness and common sense, and has come about through a lot of work in the background, not by accident.”

White said lenders are starting to realise that the clawback system is flawed and unfair.

“While I welcome recent moves by AMP and a host of other lenders including some of the major banks, be assured that we will continue to fight for fairness and bring more change.”

He said the association would continue to engage government and lenders on clawbacks, as well as net-of-offset commission payments, APRA buffer rates, and bank practices that disadvantage brokers.

Likewise, the CEO of the MFAA, Anja Pannek, said: "AMP’s move is a step in the right direction, addressing long-standing concerns about the rigid ‘cliff’ structure that has disproportionately impacted brokers.

“The remuneration structure with the upfront, trail and clawback components recognises the sharing of economic value of a loan between lenders and brokers. Clawback policies must strike a balance between the sharing returns whil ensuring that the model is sustainable for broking businesses," she said.

Clawback overhauls across the lending industry

AMP is the latest bank to change its clawback structure in recent months, with several of the major banks having also moved to a new clawback structure.

NAB announced in September that it was moving to staged clawback from month 13, which the Commonwealth Bank of Australia (CBA) had moved to last year.

Westpac recently changed its clawback to reduce the time limit from 24 months to 18 months.

Non-bank lenders, meanwhile, have been removing clawbacks on some of their products completely.

Bluestone, MA Money, Resimac, Better Choice, Better Mortgage Management and Rate Money have all removed clawbacks on some of their product lines in the past year, while Pepper Money removed clawbacks on commercial finance products last year, and Mortgage Ezy has removed clawback on the majority of its loan products, too.

Pannek stated: "While there is still progress to be made, it is promising to see several lenders taking steps towards more equitable clawback policies for broker over the past 18 months.

"We remain committed to advocating for all lenders to review their policies and ensure fairer outcomes across the industry."

Brokers have been vocal about having clawback removed completely or, at least, changed so that it does not take effect when a loan has been discharged for reasons beyond their control (death, divorce, loss of income, etc).

Paula Parola, a Western Australian-based finance broker and director of Alorap Creations, lodged a petition in Parliament to cancel clawback earlier this year.

The petition was presented to the House on 8 October 2024 and has been referred to the Treasurer. Under the petition requirements, Ministers are asked to respond to a referred petition within 90 days.

[Related: NAB changes clawback policy]