Broker clawback- is it legal?

Is it legal for broker to clawback commission from client?

- Broker did not pay any cashback to me at the beginning of loan.
- I signed the clawback clause as I anticipated loan to last more than 2 years. But situation has changed now. I must refinance and don’t want to go through same broker.

This clause is restrictive as I am stuck with same broker.

 

Cashback is different and nothing to do with this. This is clawback of the commission paid from the lender to the broker. Which the broker might have to pay back if you refi within two years with another broker.

You signed it you buy it.

Why must you refinance and why cant you use the same broker?

 

Why?

The thing is, that broker will get their commission clawed back from the lender instantaneously, the bank doesn't request it, they just take it. So they did the work for you, put their time into the application and got you the loan - do you expect them to do it for free?

 

The broker's situation hasn't changed, you are obliged to pay the clawback as you haven't fulfilled your agreement to hold the loan for 2 years (or refinance through them).

 

Changes to credit laws now limit (prevent aftre 1 January) some clawbacks being incurred by the borrower through fees and charges. The repayment obligation arrangement is one between the broker and aggregator NOT the consumer. In respect of the consumer the new law is as follows :

(c) the consumer must not be subject to an obligation to pay an amount as a result of an amount being required to be repaid under the repayment obligation.
Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers) (Mortgage Brokers) Regulations 2020

You may wish to seek advice. AFCA may offer guidance on credit law reforms and their imapct on a consumer if you feel misled. You could ask the broker about this too since they must provide honest factual guidance. Prior agreements may be struck out by this law reform. Find out.

 

It's a bunch of BS written by a guy who had no idea what he was on about and in bed with the Banks. The Lender should not be allowed to claw back commissions, name any other industry where this happens

 

I have seen some clients who had signed these clawback contracts (usually not understanding) with them promising to paid a sum up to 3 years after the original loan was taken out - well after the broker would get a clawback from the lender.

These sorts of agreements would likely be unenforceable. Seek legal advice.

 

Just heard from cba these clawbacks from broker to consumers are officially illegal now. Any views on this statement?

 

Been that way for quite a while now
Banks can still clawback the broker though.
Another win for banks, another blow to brokers.

 

My general view is never rely on a bank for advice concerning brokers.

As previously discussed in this thread, brokers are not allowed to charge a clawback fee (or anything that might look like a clawback) since 01/01/2021.

 

why would CBA be telling you that?

 

Looking at transferring a loan across to them.

 

they shouldn't be giving you legal advice!

 

A broker can uphold any claw back documents you signed with them for loans that settled prior to 1 January this year and you are still in the claw back period. While clawbacks can still occur, a broker is not allowed to pass that onto a client if the loan settled after that date.

 

Not according to my aggregator, no clawbacks for clients, regardless of when the loan settled.

 

Don't you think they have a vested interest in BS'ing you?
Why CBA?
Why not use a broker?

 

Yes that's why researching for myself. Seems like there is a 2 year rule where clawbacks can be enforced

https://strive.financial/news/changes-to-broker-clawback-regulations-a-step-in-the-right-direction

 

See Re 28VG of the NCCP Regs
NATIONAL CONSUMER CREDIT PROTECTION REGULATIONS 2010 - REG 28VG Clawback requirements