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While the regulations for clawback arrangements have now been set, the managing director of the FBAA has said that the “fight to bring balance and fairness” to clawback is ongoing.
Earlier this week, the federal government released the final regulations for mortgage brokers, bringing into force some of the government-accepted recommendations from the banking royal commission.
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The regulations focus on the clawback requirements and conflicted remuneration.
While the regulations specify the time period in which a “monetary benefit” can be clawed back from credit licensees or representatives or a licensee, they mainly do so by limiting it to a period of two years. Questions still remain over whether the prohibition of clawback recoupment will apply to broker-lodged loans that had included a clawback recoupment before the 1 January BID implementation date.
According to the managing director of the Finance Brokers Association of Australia (FBAA), Peter White, the government had listened to the concerns of the FBAA and the industry on many issues, which resulted in fewer, “more restrictive” recommendations from being implemented.
However, he said the FBAA and brokers were still not satisfied with the current state of clawbacks, outlining that work was ongoing to liaise with lenders over their individual clawback arrangements.
As such, Mr White said: “The road with the government on clawbacks was dead late last year, but the fight to bring balance and fairness to the system is very much alive.
“Clawbacks are exactly the same as they were before the royal commission, and now it’s up to lenders to amend their terms.
“Who will be the first bank to do the right thing by brokers and reduce clawbacks to 12 months or less?” he asked.
Mr White noted that lenders had the capacity to amend their clawback terms, and some were already doing so via their franchise operations.
“If a bank can offer a franchise zero clawback after 12 months, why can’t they offer it to the broking channel, which brings in such a high percentage of their business?”
The FBAA said it would continue the “robust discussion” with lenders, with Mr White adding: “I can assure members and the industry that this battle is far from over. Brokers deserve a fair go, and our role is to fight until brokers get a fair go.
“We’ve achieved a lot over the last couple of years for the industry and I believe that our unwavering commitment to see justice done will eventually see results in this area, too,” he said.
The Mortgage & Finance Association of Australia responded to the final regulations earlier this week, with CEO Mike Felton welcoming the release of the regulations after a “productive period of consultation, advocacy and negotiation”.
The MFAA outlined to members the main differences between the draft and final regulations, outlining that its goal through the process had been to:
- “Minimise potential for unintended consequences for customers and brokers, and ensure legislation and regulations carry out the intent of government’s stated objectives”;
- “Ensure the regulations provide maximum clarity to mortgage brokers to limit potential for misunderstanding of obligations by brokers”; and
- “Assist government in protecting competition, choice and access to credit for consumers – and by doing so, ensure the best possible outcomes for consumer”.
Mr Felton commented: “By maintaining our focus on these key priorities, we have assisted to shape legislation and regulations that will result in even greater differentiation, trust and confidence for the mortgage broker channel, and protect consumer outcomes and our remuneration structures as we work towards the impending review of mortgage broker remuneration by the Council of Financial Regulators and the ACCC in 2022.
“This is a significant milestone for our industry, and one that reflects both the maturity and professionalism of mortgage broking, but also the importance of our industry to our economy.”
Some lenders have already begun updating their clawback arrangements, with aggregator-owned AFG Securities announcing earlier this month that it was amending its clawback structure so that full clawback only lasts for three months, stepping down over the remaining 21 months.
[Related: Final clawback regulations released]
