AFG designs a ‘fairer’ clawback

John Kavanagh

Australian Finance Group has changed the clawback arrangements in its AFG Securities (in-house lending) division, claiming it has come up with a fairer model that balances the interest of brokers and lenders.

The new structure includes a 100 per cent clawback for the first three months, followed by a monthly proportionate step-down over the next 21 months.

The arrangement will apply to all AFG Retro and AFG Link loans settled from September 15.

AFG Securities general manager Damian Percy said the benefit of the new structure was that it avoided arbitrary “clawback cliffs”.

Percy said: “The clawback cliffs that exist today simply don’t reflect the fact that as time goes on the lender’s position improves.

“And there’s a reasonable question as to whether the prevailing structure is supportive of what the new mortgage broker best interests duty is seeking to achieve.”

While brokers may welcome an arrangement that avoids the clawback cliff, many want the clawback period to be reduced from a standard two years to 12 months, to remove the revenue uncertainty brokers face.