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Fee fracas

Dipak wanted to buy a home. He needed finance of around $1 million. He went to see a mortgage broker.

The broker sent Dipak a document called: ‘Nature and Level of Our Fees’ (the fee document). The fee document said that if the broker got a bank to approve a loan for Dipak, Dipak would have to pay a fee if he did not draw down (use) the loan. The fee document outlined a formula for calculating the amount of the fee. Dipak signed and returned the fee document, and then filled out a loan application form and other documents.

The broker secured an offer of finance from a bank for Dipak. From time to time over the next six months, the broker worked on behalf of Dipak to extend the time period of the offer and to fine-tune the loan structure.

The day before the property purchase was due to settle, Dipak emailed the broker to say that he would not be drawing down on the bank loan. Dipak bought the house using finance from another source.

The broker charged Dipak the sum of $3,000 for its services. Dipak refused to pay the full amount, and complained to FSCL.


Dipak’s view

Dipak complained that the broker had not brought the fee to his attention. He also said that he should not have to pay a fee.  He relied on the broker’s website, which said that the broker is paid commission from the bank.



We reviewed the broker’s website and the fee document. The broker’s website explained that the broker is paid a commission by the bank if the loan is drawn down. It did not say what would happen if the loan was not drawn down. However, the fee document explained that the client will have to pay a fee if the client does not draw down on the loan.

We noted that it is not unusual for a broker to charge a fee where a client decides not to draw down the finance the broker has arranged. Dipak had signed the fee document, and the broker had performed its side of the bargain. We considered there was no compelling reason for Dipak to get out of paying a fee he had contractually agreed to.



We recommended that Dipak discontinue his claim and Dipak agreed to do so.


Key insight for consumers

If you have the opportunity to read a contract (whether you in fact choose to read it or not) and you then sign it, you are very likely to be bound by its terms. It is really important to read what you sign and to ask questions if there is something in the contract you don’t understand!