The FBAA has criticised the Commonwealth Bank's decision to extend clawbacks to 24 months amid mounting concerns about how the changes to the bank's clawback policy could negatively impact brokers.
The comments arrive just when the FBAA has celebrated its 30-year anniversary, with FBAA managing director Peter White AM (pictured above left) saying that industry advocacy is “more important now than ever”.
Speaking to Australian Broker’s sister publication MPA, a CBA spokesperson confirmed the clawback changes that will come into effect from October 1.
While the first-year clawback for new applications will remain unchanged, brokers will still receive 50% of the upfront commission in the first year, with the remaining 50% distributed monthly over the second year in a “gradual straight-line approach”.
The clawback percentage will decrease every month until month 24. The CBA spokesperson confirmed that the changes were implemented based on feedback from brokers and aggregator partners.
White said he did not know of any broker who would advocate for 24-month clawback terms.
“What I do know, is that when the major banks change their policies, it is almost always to increase their own profits, and I suspect this is no different,” White said.
“My position on clawbacks has not changed. I believe they should be eliminated where the broker is acting in the best interests of the borrower. At worst they should be capped at 12 months. Therefore, despite the attempted spin around the announcement from the CBA, it is unacceptable to extend clawbacks to 24 months.”
With the market becoming increasingly competitive, borrowers and brokers now have many more lending options.
There are over 110 home loan companies in Australia, according to Rate City, with mortgage brokers holding almost 70% of the residential loan market share.
White said the reason brokers arranged the “overwhelming majority” of home loans in Australia was because brokers could offer customers “a wide range of options and act in their best interests at all times”.
“There are many lenders that are highly competitive and are introducing products that are great for borrowers, while also valuing the broking channel,” White said.
The FBAA hit the 11,000 member mark by the end of the 2022-23 financial year, marking its 30-year anniversary.
As of June 30, the association has 11,044 members, experiencing a net growth of 951 compared to the previous year. Customer-facing brokers make up nearly 93% of the membership.
White said the association had come a long way in 30 years and revealed that independent research showed that the FBAA now represented around 68% of all Australian credit representatives who were customer-facing brokers.
“I am immensely proud of our record of advocacy over the past three decades and of the gains that finance brokers have achieved through the work of the FBAA,” White said. “We’ve had wonderful directors, managers, staff, sponsors and supporters who have demonstrated that they are prepared to go above and beyond to ensure that our industry thrives.”
Emmanuel Marios (pictured above right), director of Hobart-based mortgage brokerage Derwent Finance, said he backed industry bodies that advocated and supported the industry and urged brokers to “engage as much as possible”.
“It's so amazing having these industry bodies that provide value to us brokers and it’s great for us to be able to contact them directly and they will actually respond back instead of getting some sort of generic email,” Marios said.
“For example, you can message Peter White on LinkedIn and I assure you will get a response back from him.”
Marios urged brokers to contact their association if they had industry issues, from channel conflict to clawbacks.
“We can sit there and whinge about it but something I've learned that, especially in this industry, whingeing doesn't get you anywhere in life at times,” Marios said.
Despite the progress, White said that the FBAA would not stop its trajectory of growth.
“There is still much to do and achieve and there always will be,” White said. “The industry is growing, technology is advancing, banking is changing, and we must ensure that brokers continue to evolve and succeed. Our promise to members is that we will always stand beside you and work for you.”
What do you think about the FBAA’s advocacy? Comment below.
