Clawback fee from broker - HELP!

Hi,
I recently refinanced my home loan by engaging a new broker and the new home loan will be settled in January, which means i only stayed with my old broker for around 17 months. After receiving the call from my current bank to confirm the discharge on before Christmas, my old broker texted me that I will need to pay a $2,800+GST deferred fee to him once settled.

I was shocked and I went back to check the credit quote that I signed at the beginning. It states that i have to pay the broker 0.5% of the settled amount of loan+GST if i left this broker within 24 months. i believe this is significantly higher than the bank charged clawbanck fee (approx. $1,700).
I then called my old broker and offered him the clawback fee instead of $2,800+GST. He started blackmailing and threatening me over 20 mins and even asked me to pay the full money and will give me 50% back only if I find him 2 consumers with minimum 600k loan. The negotiation is failed and I got so much hurt feelings from his blackmailing and threatening after the phone call.

Guys, I got the following questions if you can help me:
1. Do i really need to pay that $2,800+GST after settlement? I did some research and found that under the new clawback requirement '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'.
from 28VG Clawback requirements Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers) (Mortgage Brokers) Regulations 2020
2. Due to the behavior of the broker and his breach of code of conduct 'counter offer', is there anywhere i can make an complaint? and if so will i receive a positive response?

Many thanks,
Xi

 

You signed a contract.

You are legally obliged to pay the penalty as outlined in that contract.

Bkackmail is a serious accusation. How did he “blackmail” you?

 

1. sounds like a binding contract. why did you sign?
2. Credit, finance and loan complaints | Australian Financial Complaints Authority (AFCA)

 

What a shame its gotten to this path.

Thr word "blackmailing" is very losely used here.

But at the end of the day you did sign the credit quote, most brokers in the industry don't add this but looks like you didnt read the document before you signed it.

 

Can you delay the settlement by 1 month? That would take it to 18 months and maybe there would be no clawback from the bank, so the original broker may let it go.
It does sux, and lesson learnt for next time.

 

I'm surprised that your new broker didn't ask you if this would apply to you before commencing the refinance.
Is there any reason why you didn't go with the previous broker for the refinance as they probably wouldn't have charged you the clawback if they had done the refinance.

 

You signed a contract that you obviously didn’t read or understand and now you don’t want to pay up. As mentioned above why not try and settle after the 18month limit

 

At the end of the day you signed an agreement with your old broker. You then did something that will cause them a financial loss, despite them doing the work for you.

There are avenues through which you can complain, but if the broker is following the appropriate procedures (which does appear to be the case), you'd loose.

Personally I think claw back fees create more hassle than they're worth, but that's how I run my business and most brokers disagree with me. The quickest and easiest way through this (and probably the least costly) is to pay the old broker what you agreed would be paid.

 

This was the agreement. You signed it, you pay it.

 

You have every right to refinance. That is your prerogative of course, but you could have saved this from becoming an issue by asking the originating broker to do the refinance. If you didn't wish to work with that broker again, you will just have to pay the fee. It's a real problem in the industry; particularly this past year or so, with so many lenders offering cash backs to move around. Brokers aren't truly paid until 2 years after they are paid. I don't know of any other industry where this exists ( perhaps it does...I just don't know of it ) , nor anyone in any other role who would accept this as part of their employment conditions Sadly, no one in the industry - especially aggregators - want to deal with this issue. Aggregators are petrified of a fee for service model .... brokers are equally petrified; everyone believes consumers will not pay for something they think they should get for free. I disagree. Sure, some easy business would be lost... the vanilla sort of stuff that the Aussies and Mortgage Choices and Loan Markets of the world tend to get a lot of.... those borrowers can typically find a solution at retail /branch land.... but I don't believe the free service at the banks is remotely adequate for anyone but vanilla borrowers . They offer limited knowledge and will often leave you snookered. So yeah, broker numbers would probably diminish as most of the easy stuff would go to the retail land, but anything that doesnt fit there still requires substantial work to be done and substantial expertise to set - and I believe the non "order taker " types of brokers who are skilled at these things could charge well for the service. No easy answers obviously, and about to become more difficult on Jan 1 ...but increasingly I believe the industry needs to rip the bandaid off and move to fee for service. This clawback nonsense is not fair to anyone, and in a few days brokers will have no ability whatsoever to recover these clawed back comms

 

Fine, as long as the lenders also need to charge the same upfront fees to clients who come to them direct. I agree that people will pay for a service that provides them with a clear benefit however it is nice to be able to say we provide this already without needing to charge fees upfront.
Lenders aren't required to apply the Best Interest Duty so clients can potentially end up with a less suitable product.

 

Not sure what legislation says, but brokers aren’t allowed to pass on clawback fees anymore. It’s a quazi exit fee on a loan, so the regulators are banning this to promote competition/etc.

Unsure if it’s passed or in motion - so that may mean something for the contract you’ve signed (not sure, lawyer to advise if it’s enforceable). It will likely be a legacy contract too (ie before the changes), so unsure how it’ll flow through.

I’m saying that, it’s a bit unfortunate it’s come to this.

 

The issue is that many are mortgaged to the hilt when they apply, so they will need to borrow the fee as well as the 80%+ for the property. This will lead to punters shopping around for the cheapest mortgage originator rather than the best for their circumstances which will lead to more people going directly to the no-cost option of the bank.

 

Maybe I see it a little differently because I work exclusively with investors and what I see is that the banks with retail channels can only get you so far....
Until recently brokers have only ever penetrated @ 40% market share- even with a free service.
Post APRA, the % has grown to almost 60% . It is no coincidence in my view. branch land cant meet needs quite so easily anymore. Bank staff typically have limited knowledge in my experience. Often very limited knowledge. I accept that there are some great staff out there who do a great job - but they are only ever able to offer you one brand, one servicing calc, one set of policies. They cross collateralise often. They dont see several deals ahead. All of which is fine if you have plans to buy one property- maybe two. Maybe three. Not so great if you are on propertychat because you want to get further than that . These ( and many more ) are just some of the reasons why I suggested brokers need to rip the bandaid off. Vanilla borrowers will continue to use retail channels whether you charge a fee or not . They do it right now- even when brokers are free - but more and more people need a skilled service that is well beyond the capacity of loan officers at branch land to offer , and would be willing to pay for it if brokers started charging for it.

For brokers to move to a fee for service model, they would just have to accept they would be competing against a free in branch service- but they are already competing against that service and until recently they have struggled to penetrate 50% market share....over 30 years . So it's a straw man argument in my view.

The fairest thing would be for clawback to go....but I dont see any industry push for that.... Do branch staff get salaries clawed back if loans roll off their book? Do branch managers lose bonuses after padding their KPI's in one year and losing the loans the next?

Brokers are already being paid less if money sits in offsets...if construction loans are drawn down in stages.... and that's after the 40% pay cut post GFC. There is significant additional work involved around compliance, and BID will add more from next week..... Its a grossly unfair model all around. If brokers truly believe they add value, save time, provide guidance, stop people making mistakes with loan structures etc .... why should they not charge for it ? Thats all Im saying. These are just my views.... I just think the industry should place a value on itself and not be afraid to do so...