28% of brokers emotionally impacted by clawbacks

Currently, brokers can be subject to having their upfront commissions clawed back up to two years after a loan has settled. This typically occurs if a borrower refinances away from the lender within that time or discharges the loan for another reason (for example, selling their house).

While many lenders have updated their clawback policies recently (most reducing them down to 18 months), brokers have said that the policy is negatively impacting them both professionally and personally.

According to the FBAA’s Monthly Broker Poll, conducted by CoreData, of the 100 brokers who responded to the clawback questions, 84 per cent had experienced clawbacks in 2024.

Of these, mortgage brokers were the most affected (at 92 per cent).

While the majority of brokers said less than 5 per cent of their loans were affected by clawback, one broker told the FBAA survey that they had $29,000 clawed back in one month recently due to the client restructuring his business banking and the bank insisted he roll his home and investment loans over to them as part of the deal.

Another was due to a client selling his businesses and no longer needing his $2 million loan facility.

Sole traders were found to be least likely to have been subject to clawbacks in 2024 (with 32 per cent saying they hadn’t lost revenue to clawback), the survey found, with 65 per cent of brokers working in a company experiencing clawbacks totalling more than $10,000.

Nearly two-thirds (64 per cent) of brokers who had clawbacks said the biggest impact on their business and life was that it “created instability in personal finance and business processes”.

However, 28 per cent reported being negatively impacted emotionally by the policy. Of these, 16 per cent of brokers said it negatively affected their mental health, 14 per cent said they felt that the situation was out of their control, and 11 per cent said they believed clawbacks “devalued the profession”.

One broker said: “From a mental standpoint, I felt as though I was working for free, although I looked after my clients’ best interests, I couldn’t help feel as though the banks won, the clients won, and I lost.“

A Queensland-based broker told the survey; “It didn’t really affect my business but made me wonder whether or not to continue. I feel it is very unfair we do all the work and run the risk of not getting paid or having to pay it back.”

One Victorian broker told the survey: “They are always painful when you have done all the work and the situation is completely out of your control due to selling, separations and client chasing cashbacks – that will likely go with another broker in this situation, and you only find out once it’s done. 100 per cent [clawback] within 12 months is way too blunt of a tool.”

An additional 11 per cent said lenders clawing back broker commissions fostered distrust in lending institutions.

What should be done about clawback?

While brokers have taken the initiative to build client relationships and monitor potential triggers to manage clawback (and setting aside reserves to provision for clawbacks), 80 per cent of respondents said that they wanted to see clawback be made proportional to the time that has passed, with a similar proportion suggesting lenders reduce or cap clawback periods.

More than half (58 per cent) want to see industry-wide standards for clawback, while others prefer clawback policies to be abolished altogether.

Responding to the FBAA broker poll, one broker said: “Clawbacks were originally brought in to combat a problem that didn’t exist, churn of a broker’s book. Legislation has now taken over as the solution for this type of action. Clawbacks should now be abolished and should have been years ago. There is legislation to combat this, unfair contracts.”

Another said he thought that clawback on property sales should be abolished altogether.

“It has nothing to do with a broker if a client decides to sell their property and we should not be punished for something that is entirely out of our control,” he said.

“It is also entirely in conflict with best interest duty. If a client asks a broker their opinion on whether they should sell or not, the broker is legally obliged to give advice that may take food off their own table. No other industry in the world expects this and it would never be applied to private and business bankers.”

FBAA managing director and industry mental health awareness ambassador, Peter White AM, noted the findings, saying: “These responses highlight the personal toll of clawbacks and the uncertainty and unfair loss they represent.

“These are real human consequences and I want to ensure that lenders and government read these.”

The FBAA has been engaging with lenders and politicians on the impact of clawbacks on brokers, with White saying while change won’t happen overnight, the FBAA continues to advocate further progress.

In the meantime, he urged any finance and mortgage broker who is struggling emotionally to seek help.

“This is the reason we established an online Wellness Hub, which provides not only a source of information for brokers, but a way to connect them with someone who can help,” he said.

Brokers have also been calling for action on clawbacks, with a banker-turned-broker last year lodging an e-petition with the House of Representatives seeking signatures of support to cancel clawbacks and have any commissions clawed back since the introduction of the best interests duty (BID) – which came into effect on 1 January 2021 – refunded.

What do you think about clawbacks and how have they impacted you? Let us know in the comments below:

[Related: AMP Bank changes commission structure]