One of the country's largest mortgage groups has conceded that certain types of trail commissions deserve to be binned as part of proposed reforms to home lending practices.In its submission to the Productivity Commission inquiry, Australian Finance Group, which helps almost 3000 brokers arrange residential loans, has conceded that trail payments which increase over time should be scrapped."AFG strongly supports the removal of this form of trail commission … however, AFG does not agree that standard trail commissions operate as a real disincentive to switching."Most lenders that market loans through brokers typically pay standard or flat annual trail commissions of between 0.15 per cent and 0.27 per cent of the outstanding value of the loan.However, many lenders, including CBA and National Australia Bank, might also increase the percentage rate of the trail as the loan matures.According to one broking rate schedule seen by Banking Day, NAB has been offering some brokers the following escalated trail rates on standard home loans:•    First Year - 0.165 per cent;•    Second Year - 0.165 per cent;•    Third - 0.22 per cent;•    Fourth - 0.275 per cent;•    Fifth Year onwards - 0.33 per cent. The doubling of the trail payment by the fifth year means that brokers could potentially lose income if their client decided to refinance with another lender that only pays them a flat trail.Clawback obligations imposed on brokers by lenders often mean that brokers also lose part of their upfront commission when clients refinance with another lender.The Productivity Commission argues that clawback arrangements distort the broker-client relationship because they act as a direct disincentive to consumers switching to a cheaper home loan.AFG is less clear about its position on whether clawbacks should also be banned."Commission clawbacks are, in AFG's opinion, a much more complex issue as they require the broker to repay the remuneration for successfully originating a loan," AFG told the inquiry."AFG is of the view that clawbacks can also benefit consumers by providing a financial disincentive to short-termism and encouraging brokers to recommend products that are likely to remain suitable into the reasonably foreseeable future."The broking group warns the commission that if commissions were not clawed back, lenders would be likely to recoup "costs through other means which may well have more significant negative consequences for the broking industry and consumers".AFG is adamant that forcing consumers to pay fees for broker services would cause major disruption in the finance industry."The four major banks would be the only beneficiaries of a change of this kind as they would gain an additional competitive advantage over competing lenders that do not have extensive direct distribution channels," the company argues.AFG also maintains that the introduction of a fee-for-service pay model would not necessarily mean that lenders would pass on savings to customers of not having to pay commissions.That's because major lenders with branch networks would need to increase staff to handle loan applications.