Do You Have to Pay Clawback Fees? The Facts for Borrowers

When navigating the home loan process, understanding the nuances of fees and commissions is essential. One question that often arises is about clawback fees. Are these something borrowers need to worry about? Let’s break it down.

What Is a Clawback?

When a mortgage broker assists you in securing a home loan, they earn an upfront commission from the lender. However, if you repay your loan early - usually within the first two year - the lender can reclaim part or all of that commission from the broker. This repayment by the broker is referred to in the industry as a “clawback.”

The amount clawed back typically depends on how early the loan is repaid:

• 100% clawback if the loan is repaid in the first year.
• 25% clawback or less if repaid in the second year.

Can Brokers Charge Borrowers a Clawback Fee?

In the past, some brokers attempted to recover these clawback fees by asking borrowers to reimburse them if the loan was repaid early. These arrangements were often formalised in agreements signed at the start of the loan process.

However, this practice is no longer legal. Following the reforms introduced after the Banking Royal Commission, brokers are now prohibited from asking borrowers to pay clawback fees under any circumstances. 

What to Do if You’re Asked to Pay a Clawback Fee

If a broker asks you to pay a clawback fee, here’s what you should know:

• You have no legal obligation to pay. Brokers cannot enforce such an agreement, and the request itself is against industry regulations.
• If you feel pressured or threatened, reach out to one of these organisations for support and guidance:
• Finance Brokers Association of Australasia (FBAA)
• Mortgage and Finance Association of Australia (MFAA)
• Australian Financial Complaints Authority (AFCA)

These organisations can provide assistance and ensure brokers adhere to ethical and legal standards.

Are Clawback Fees Still a Concern for Borrowers?

Simply put, clawback fees are no longer an issue for borrowers. You cannot be asked to repay your broker for any clawback under current Australian regulations. If a broker makes such a demand, you have every right to refuse and report the incident.

At Regional Finance Solutions, we have always prioritised transparency and ethical practices. We have never, and will never, ask our clients to pay clawback fees. Our mission is to make your home loan experience as smooth and stress-free as possible.

For expert guidance and support throughout your home loan journey, contact Regional Finance Solutions today. Let us help you achieve your financial goals with confidence and peace of mind.