Stepped approach welcomed by FBAA and MFAA
AMP Bank has announced it will be upgrading its clawback policies on residential home loan commissions for mortgage brokers, moving to a stepped structure.
The non-major bank is the latest lender to improve clawback policies for brokers – others to have done so include NAB, CommBank, Westpac, Bluestone Home Loans, Pepper Money (commercial loans), Rate Money, and MA Money.
Under AMP Bank’s new stepped clawback commission policy, which will apply to settled residential home loans effective from January 1, 2025, commissions will be gradually reduced where the loan is fully or partially repaid or discharged within 18 month.
It involves a stepped or stage approach to clawbacks - after the first three months, clawback is gradually reduced from 100% to 50% at 12 months, and then as low as 25% between months 17 and 18. You can see the full chart below:
The current clawback structure involves 100% clawback for loans repaid or discharged within the first 12 months and 50% for the months 13 to 18.
Trail commissions and upfront commissions will also be adjusted from January 1, with the trail commission for AMP Bank residential home loans reduced from 0.17% to 0.15% (+GST). The upfront commission for the Select loan package will increase from 0.30% to 0.60%.
FBAA managing director Peter White (pictured above right) welcomed AMP Bank’s changes to its clawback structure and said the changes it and other lenders had made followed sustained lobbying by the FBAA over the last few years.
MFAA CEO Anja Pannek (pictured above centre) said it was promising to see several lenders taking steps towards more equitable clawback policies for brokers over the past 18 months.
Bank’s clawback updates driven by brokers
Paul Herbert (pictured above left), head of lending and everyday banking distribution at AMP Bank, said following extensive consultation with the broker community and industry bodies, “we believe this new framework strikes the right balance for brokers and customers”.
“It recognises the critical work brokers do upfront to educate and support clients in securing loans that suit their personal circumstances, and which can have a material financial impact,” Herbert said. “Importantly, the move to stepped clawbacks also reflects the reality that client circumstances often change in the early years of a loan.”
Herbert said the bank remained committed to advocating for fair, transparent, and consistent commission frameworks across the industry, recognising the crucial role brokers played in maintaining a healthy lending market for consumers.
AMP Bank’s announcement regarding clawbacks follows another significant milestone for the second-tier lender, which yesterday revealed that the first loans applications using its new origination platform had been successfully submitted and approved as part of a pilot test.
FBAA praises clawback changes
White said the FBAA, representing all finance and mortgage brokers, had for years been leading the fight over clawbacks, meeting with all stakeholders including lenders, regulators, and senior government ministers across various governments.
“We have openly and loudly challenged the current systems and structures,” said White.
“While I don’t want to overstate these advances, and acknowledge there are still mountains to climb, neither should we as an industry take these gains for granted. Every small change is a change for fairness and common sense, and has come about through a lot of work in the background, not by accident.”
Lenders are starting to realise that the clawback system is flawed and unfair, said White.
“While I welcome recent moves by AMP Bank and a host of other lenders including some of the major banks, be assured that we will continue to fight for fairness and bring more change.”
He said in addition to clawbacks, the FBAA would continue its lobbying efforts regarding net of offset commission payments, APRA buffer rates, and bank practices that disadvantage brokers.
MFAA welcomes AMP Bank's move
The MFAA also welcomed AMP Bank’s changes to its clawback policy, saying it was encouraged to see lenders adopting more progressive and balanced approaches.
Pannek said while there was still progress to be made, it was promising to see several lenders taking steps towards more equitable clawback policies for brokers over the past 18 months.
“We remain committed to advocating for all lenders to review their policies and ensure fairer outcomes across the industry,” Pannek said.
“AMP’s move is a step in the right direction, addressing long-standing concerns about the rigid ‘cliff’ structure that has disproportionately impacted brokers.”
“The remuneration structure with the upfront, trail and clawback components recognises the sharing of economic value of a loan between lenders and brokers. Clawback policies must strike a balance between the sharing returns while ensuring that the model is sustainable for broking businesses.”
What do you think of AMP Bank’s new clawback and commission policies? Comment below.
