Insights for consumers
Consumers should carefully read and understand all documents provided by their mortgage adviser to avoid unexpected charges.
Mortgage advisers receive commissions from lenders as payment for the work they do in arranging loans for clients. However, if the client goes to another lender within a specified time period, the adviser usually repays the commission to the original lender (known as a ‘clawback’). Advisers can recover some, or all, of the ‘clawback’ from their clients if this happens. However, they must clearly document what might happen if the client changes lenders within the specified period.
What happened?
In September 2022, Ajay engaged a mortgage adviser to arrange a loan to buy an apartment. He made an unconditional offer, with a purchase settlement date in March 2023.
In January 2023, the adviser told Ajay he had found a bank willing to lend. The bank provided the loan and paid the adviser a commission of $2,500 for arranging the loan.
In August 2024, Ajay contacted the adviser to top-up the loan. The adviser applied to Ajay’s current bank, but they declined to lend him more money.
In October 2024, Ajay switched his loan to another bank.
In November 2024, Ajay’s original bank clawed back their commission from the adviser.
Over November and December 2024, the adviser emailed Ajay asking him to pay for the clawed back commission. Ajay did not respond and, in January 2025, he received a letter from a debt collection agent requiring payment of $2,500. Debt collection fees had been added to the amount.
Ajay complained that the adviser had told him his services were free. He also said the adviser had not done a good job for him. The adviser did not accept that he had acted incorrectly. Ajay asked FSCL to investigate his complaint.
What was FSCL’s view?
We were satisfied that the adviser had clearly disclosed to Ajay that switching to another bank within 30 months of the loan being advanced would incur a fee. The adviser had sent Ajay his terms of service document in September 2022, which set out this charge.
The adviser had explained to Ajay that he was paid by the bank when the loan was drawn down, and he specifically referred Ajay to the relevant terms of his business document that covered the commission claw back charge. Ajay signed a document confirming he had read the terms of business , including the section outlining the charges.
The adviser documented the January 2023 meeting where he presented the bank offer to Ajay, noting that he verbally explained the charges for switching banks within 30 months.
When Ajay contacted the adviser in August 2024, he indicated he wanted a loan from another bank with a lower interest rate. The adviser reminded Ajay in writing about the charge if he moved banks before the 30 month period.
We found that the adviser had worked hard to secure Ajay a loan and fully disclosed the ‘clawback’ fee.
What was the outcome of FSCL’s investigation?
We did not uphold Ajay’s complaint.
However, the adviser offered to waive the debt collection costs if Ajay paid the $2,500 in a lump sum. Ajay accepted this, and we closed the case.
