Clawbacks are a controversial subject in the broker community. The recent spate of cashback offers on the market have seen clawbacks come roaring back into the broker channel debate, with several telling Australian Broker that customers are now able to cycle through lenders, claim their cashback and leave brokers high and dry.
One broker, speaking on the condition of anonymity, told AB that several clients had refinanced multiple times within a year, claiming a cashback each time, while leaving a string of brokers out of pocket via clawbacks.
This was something that they had seen across the channel, which was confirmed to Australian Broker by several other brokers and industry figures, who were reticent to comment publicly due to fear of backlash.
“I’ve been a broker with a major aggregator for over 20 years, and I find it hard that the banks are offering cashbacks on consideration of the brokers,” said the broker, who is linked to a major aggregator and franchise network. “We do a lot of work to get a loan across the line, to get it approved and settled, and sometimes it can take months.”
“And then these customers who might be just chasing the cashback refinance the loan, go to another broker, then another and another, possibly make $15,000 extra cash in 12 months, while 5 or 6 brokers get a clawback on their commission”.
“I think it’s very unfair for products to have these clawback systems not reviewed, particularly when, even without the cashback, if the customer leaves within 12 months we get a clawback.”
“We call it a commission, but it’s how we get paid for our work, whereas if the lender does a loan and it gets discharged, they still get paid. I don’t think it’s a fair system.”
“I’ve seen it a few times. It’s quite a shock. Some customers have been poached by a bank, or gone into a branch and been told by a lender that they can get a better deal and then we get a clawback.”
“The clawback system overall is pretty poor for the hard-working, honest brokers who lose their money. They don’t get paid for doing a lot of work.”
Finance Brokers Association of Australia (FBAA) CEO Peter White said that the cashback offers were just the latest iteration of an ongoing problem with the clawback rules.
“This principle of what is going on is not new,” he said. “Not just cashbacks, but being exposed to different deals by lenders to try and buy clients.”
“In the old days, we used to see basic home loan rates, or there’s honeymoon interest rates, or these days its cashbacks. It’s something to lure the client that is a little bit left of centre.”
“In the current environment, where you have clawbacks, it has a financial perk as all these things do when you incentivise borrowers to go in different directions. “
“Most of the stuff we hear about is one transaction where they get free finance because the lender has given them a $3,000 cashback and the loan was written in the last 12 months.”
“It’s incumbent on brokers to act in the best interests of the client, so if the client looks like walking and it looks like you’re going to lose your upfront, then you’d going to go hell for leather to find the best deal in the marketplace with a cashback that is in their best interests. Even though you’ll get him yourself with a clawback, you still keep the trail going.”
“You get a new upfront which mitigates the clawback and you keep the trail going. That’s a business mindset. I don’t necessarily believe that one should do that, but in today’s marketplace, the lenders are basically forcing brokers to have to do that, so long as they act in the best interests of the client.”
“If you don’t do anything, you lose the client. You lose the upfront and you get the clawback anyhow. At least if you rewrite the deal, you get a new upfront and you continue the trail.”
“It’s one of those things where you’re damned if you do and damned if you don’t, but the long game if keeping the trail going. I know it doesn’t mitigate the work that you have to do to rewrite the loan, but if you don’t, you lose the loan to somebody else or directly to the bank, as the case may be.”
“Personally, I don’t believe that clawbacks should exist unless you’ve done something illegal or breached the contract with the lender.”
“I’ve had this view since clawbacks came into being in the late 2000s. The reality is that you did your job: your job is the find the client, bring them through a system or process and get them a loan settled. And you get paid for doing that.”
“That upfront commission should not be subject to a clawback unless you commit fraud or you do something criminal and or breach of agreement. I think it’s completely wrong and always have, and continue to have the same view today that I always have had on clawbacks.”
