A recent survey by CoreData for the Finance Brokers Association of Australia (FBAA) has exposed the dual challenges faced by mortgage brokers due to clawback policies: significant emotional distress and financial losses.
With eight in 10 brokers affected by clawbacks in the past year, with nearly half of polled brokers losing more than $10,000 each due to lenders’ clawback policies, this revelation has brought to light the financial and emotional toll on mortgage brokers, prompting urgent calls for industry reform.
A clawback requires brokers to return part of their commission if a loan is repaid early, typically within a predetermined period. This policy compensates for the lender's lost interest but can undermine brokers’ financial stability.
For example, a broker earning a commission on a $300,000 mortgage may need to refund some if the loan is refinanced within two years, impacting their financial security.
The CoreData survey revealed that financial setbacks from clawbacks, likened by some industry insiders to modern-day slavery, have contributed to widespread emotional issues among brokers.
Descriptions like “loss of motivation, loss of productivity, frustration with industry,” and “uncertainty in your mental well-being” depict the psychological toll.
One broker shared, “It is a constant worry in my mind,” while another simply said, “Depression.”
Peter White (pictured above), FBAA managing director and mental health advocate, stressed that while the financial implications are severe, the personal suffering cannot be overlooked.
“These are real human consequences,” White said, advocating for heightened awareness and policy change.
The FBAA is pushing for proportional reductions in clawbacks, with more than half of brokers seeing value in establishing national standards. This advocacy is part of a broader effort to mitigate the adverse effects these policies have on the industry’s professionals.
The MFAA previously advocated for refining clawback policies, pushing for a fairer system with shorter timeframes to lessen harsh impacts. The organisation noted that completely eliminating clawbacks would require an extensive review of the remuneration model, posing regulatory risks.
