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The prudential regulator of the Australian banking sector has endorsed lenders clawing back commissions from ineffective brokers – and brokers have largely agreed.
APRA announced that lenders should have the right to claw back commissions “where there are high levels of delinquency or process failures on loans originated by third parties”.
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APRA said clawbacks provide a balance to upfront commissions, which “tend to encourage less rigorous attention to loan application quality”.
Direct Mortgage Concepts principal Wayne Dickerson agreed that ineffective brokers should be held accountable, provided it was done in an objective and transparent way.
He told The Adviser that brokers could not complain about losing their commission if they were responsible for a loan falling over.
Home Loan Station director Giles Bray also said clawbacks were reasonable when brokers failed to do their due diligence and their clients were refinancing more than usual.
However, he warned the system could be open for abuse if banks were given more power to claw back commissions.
All Mortgage Finance principal Gail Baker said it was fair, in theory, to punish “churning” brokers but not always fair in practice.
“If you do your customer’s needs analysis and their intention is to keep that property or stay with that lender, I think it’s reasonable to do the loan and expect not to be clawed back,” she said.
“I think there needs to be questions asked before clawbacks happen, because a lot of brokers are clawed back when they haven’t had anything to do with the scenario.”
Get Ahead Finance director Brent Thrush told The Adviser that he had no objection to losing upfront commissions for loans that he should never have written.
However, he said the current system needs to be reformed because it is tilted in favour of the lenders.
“I would like to see them being a bit fairer on brokers – if there’s a clawback, looking at why the customer paid out the loan early,” he said.
