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The Finance Brokers Association of Australia will continue to advocate for a government review of clawbacks in 2023, while it will also tackle delays in paying commissions after offset account funds are drawn down.
In a pre-recorded speech at the FBAA conference last year, Assistant Treasurer and Minister for Financial Services, Stephen Jones, addressed the issue of broker clawbacks.
Jones raised the prospect of reviewing clawbacks if the money being clawed back was greater than the cost for the bank to set up the loan.
White said the possibility of clawbacks going completely would not be on the table for consideration. “That may happen one day in the future but that is not now. Today is about getting to ‘third base’, as we’re already off ‘first’ and we’re on ‘second base’ today,” he said.
“At this point in time, our high-level position is clawbacks must be limited to 12 months and the broker must be left with an agreed minimum amount from the upfront commission being clawed back. So not every dollar can be clawed back from the broker.”
The FBAA is aiming to convince the government to intercede in what are essentially commercial agreements, by showing they are commercially unfair, inappropriate for purpose, are disadvantaging brokers and consumers and are being profited from by banks.
The FBAA is also lobbying the government over commission payments to brokers after offset account funds are drawn down. White said there has been a vast increase in brokers waiting 12 months or more to be paid after funds are used out of offset accounts.
Currently, the upfront commission paid to brokers on a loan is calculated net of offset. Lenders have applied different time horizons to reviewing and paying commissions after offset funds are used, with many only processing commissions after 12 months, White said.
“Brokers should be paid in a timely manner when money is drawn down from the offset account, but there has been a big increase in lenders not paying brokers for 12 months or longer.”
White said this was “ridiculous and completely unfair” and needed to be fixed.
The FBAA is also following up on similar moves in the US and Canada to look at whether loan serviceability buffer rates should be reviewed, particularly for existing borrowers “already in the system” who are restructuring their circumstances rather than seeking more money.
“A 3% buffer rate is well and good in times when rates are low and going up. But maybe there should be a consideration for existing borrowers that a reasonable buffer rate is only 1 or 1.5% above the home loan rate, not 3%,” White said.
“These borrowers are just refinancing. It’s not like interest rates are going to go up from here another 3% cent in three years. At the very least, we believe assessment buffer rates should be reviewed every two to three years to ensure they are still relevant.”
Other items on the FBAA’s agenda include a push to amend ASIC’s Best Interest Duty rules to ensure BID only applies to the predominant debt in bundled products, and an end to point-of-sale exemptions for the motor sector under NCCP.
“When the NCCP legislation came into play, motor vehicle dealers and some others that offered credit at the point of sale were isolated from obligations,” White said. “That was meant to be for 12 months, and 13 years later, it’s still a problem. It’s not transparent for borrowers.”
The FBAA is also working with the Australian Bureau of Statistics to ensure that the data that it collects and publishes is appropriately reflective of the broker industry, including how data about their role and career is collected and reflected in future releases.
