Login
ISCOVER
Members of the broking industry have spoken out against the major bank’s new clawback policy.
Finance Brokers Association of Australia (FBAA) managing director Peter White AM has called out the Commonwealth Bank of Australia (CBA) despite its positioning that the new clawback policy would be more beneficial for brokers.
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
“My position on clawbacks has not changed. I believe they should be eliminated where the broker is acting in the best interests of the borrower. At worst they should be capped at 12 months,” Mr White stated.
“Therefore despite the attempted spin around the announcement from the CBA, it is unacceptable to extend clawbacks to 24 months.”
Mr White further criticised the new policy, accusing the major bank of merely looking to increase its own profits instead of acting in the best interests of brokers.
“The CBA claims that they are reacting to feedback from brokers, however, I know of no broker who would advocate for 24-month clawback terms,” he said.
“What I do know, is that when the major banks change their policies, it is almost always to increase their own profits and I suspect this is no different.”
According to Mr White, as the market becomes increasingly competitive, brokers have found themselves arranging the “overwhelming majority” of home loans in Australia because brokers can “offer customers a wide range of options and act in their best interests at all times”.
“There are many lenders that are highly competitive and are introducing products that are great for borrowers, while also valuing the broking channel,” Mr White concluded.
Furthermore, the wider broker community has aired its frustrations with the major bank’s policy.
Director and finance broker at Commrural Lending Services Gary Eckel commented that this was a step in the right direction, but it’s “still not enough”.
“This is the CBA playing games. Why should brokers be penalised for loans that are paid out through no fault of the broker?” Mr Eckel stated.
Owner of Embrace Financing, Caroline Lima, stated: “According to the LMG Commission Schedule, CBA’s previous clawback was 50 per cent between 12 and 18 months and nothing after 18 months.
“They’ve actually extended their clawback period, while pretending they are doing something good.”
What is the new policy?
CBA announced that all new applications lodged from 1 October 2023 will have staged clawbacks after the first anniversary.
Currently, the major bank claws back 100 per cent of a broker’s upfront commissions if the broker client refinances their loan away from the bank within 12 months from the date of settlement.
If the client refinances between 13 and 18 months, 50 per cent of the upfront is clawed back (it is illegal to apply clawback arrangements after two years from the beginning of the credit contract).
However, under the new policy - clawbacks will be extended by an additional six months (to 24 months), albeit at a lower rate.
According to a CBA spokesperson: “Under the new clawback policy, which will be effective on all new applications submitted on and from 1 October 2023, the first year clawback will remain unchanged with brokers earning 50 per cent of the upfront commission after one year.”
“The remaining 50 per cent we will pay out over the second year with a monthly, gradual, straight-line approach which will see the clawback percentage continue to reduce every month until month 24.”
The spokesperson stated the update was made on the back of “feedback from [CBA’s] brokers and aggregator partners”.
[RELATED: CBA updates clawback policy]
JOIN THE DISCUSSION