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The FBAA has called for a study to settle once and for all why loans end prematurely and whether clawbacks are fair.
Chief executive Peter White said an independent research company should be hired to examine loans that are terminated within two years.
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He said that would finally reveal whether early terminations are generally caused by churning or factors beyond the broker’s control.
“It will help to bring this debate to an end. My instinct says it’s probably 80 per cent outside the broker’s control and 20 per cent is churning,” he told The Adviser.
Mr White said brokers would need to lift their standards if it turned out that churning was the reason for most early terminations.
However, he added that banks would have to look seriously at eliminating clawbacks if it turned out that brokers were largely innocent.
“There are certain things that are within someone’s control and certain things that are not. I’m a strong believer that if you’ve done a day’s work, you deserve to be paid,” he said.
“This is the only industry I can think of where you get paid to do a job – and then if something beyond your control happens, you can lose that payment.”
