It is not reasonable to expect clawback provisions to be removed altogether, the chief executive of the
MFAA has said in response to claims that clawing back commission from brokers is “fundamentally not fair”.
The chief executive of the MFAA, Siobhan Hayden, has said that whilst the MFAA agrees that clawbacks remain a point of frustration for finance brokers, removing them altogether is not an option.
“Clawback is directly linked to how lenders price their product within our channel and the MFAA accepts that it is not reasonable to expect clawback provisions to be removed altogether,” she said.
“Alternatively, the MFAA seeks to identify initiatives that will future proof our industry and continues to table these with our lender partners.”
According to the MFAA, only 1-2% of total loans transacted within a year are exposed to a clawback and therefore does not constitute a major business issue for the majority of finance brokers.
As such, Hayden says the industry should focus on educating consumers on clawback provisions rather than fighting to ban them.
“In all industry issues, the MFAA is committed to firstly understanding the matter from all views, and then working with stakeholders to identify reasonable solutions. An initial step for finance brokers is to ensure that they educate their customers on how clawback provisions work and that their disclosure documentation includes a clawback term,” she said.
Accepting that clawbacks will remain a part of doing business, Hayden said the MFAA has partnered with lenders to challenge lenders to adopt ‘broker best-practice’ for the industry, such as ensuring that any lender enquiries from a broker-introduced loan are redirected back to the broker.
“
NAB and
ANZ are two lenders that have adopted this policy to the betterment of the industry,” Hayden said.
“I would like to see all lenders adopt policies that continue to support brokers as well as help prevent any further contraction in real broker earnings.”
In addition to lenders, aggregators such as
Connective,
FAST and
AFG have all confirmed to the MFAA that they would intervene and support brokers where clawback provisions have been clearly explained but the broker was still unfairly penalised.
“This could include the sale of an asset after 23 months, on a 24 month clawback,” Hayden said.
“Aggregators all agreed that where the finance broker has continually demonstrated sound business practices and the clawback is due to circumstances outside the broker’s control, then clawback can be negotiated. A reduction or scalability of the clawback is also an option.
“Through our membership, the MFAA represents the views of over 75% of brokers in the industry and we will continue to seek workable solutions that will bring about sustainability for all stakeholders.”
