Mortgage Broker seeking clawback of commission

lawred2 · 13-01-2017 11:20am #1

Hi,

I'm looking for a bit of impartial advice here.

So drew down a mortgage via a broker in May 2015. Signed general terms and conditions of business with broker in Dec 2014 which made mention of Broker possibly passing commission fee clawbacks on to customer if mortgage redeemed - no specific details, timelines - just all very conditional like you would expect to see in any terms and conditions. Just like - "if you fail to meet your repayments you may be in danger of repossession" type terminology.

So that was Dec 2014 and no particular mortgage product had been advised or put forward by the broker at that stage.

Fast forward to May 2015 - gone through the process of getting approval and drawing down a mortgage product.

I just switched mortgage in Dec 2016 so effectively redeeming the mortgage drawn down via the broker. So roughly 19 - 20 months after draw down.

Broker has contacted me seeking clawback of commission. Apparently there was a 3 year period within which a redemption would result in the bank seeking clawback of commission paid to broker.

Now I'm not necessarily on board with such a request from the broker for me to cover this clawback in this case - not at any point during the recommendation of the product, the application, the approval or the draw down was this 3 year period disclosed to me. First I heard of it was when the broker contacted me seeking payback.

I would have considered that an abject failure on the part of the broker to disclose a material fact/aspect of our agreement. Given that such information was never shared with me I obviously was unaware that any such period applied or was in force and consequently believed (in good faith) that I was perfectly entitled to switch our mortgage. I can't operate in a vacuum nor am I a mind reader.

I think they were negligent and I don't believe I should have to foot the bill for their failure to disclose pertinent facts. Surely they can't just rely on general unspecific terms and conditions. Sure what's stopping them entering into some ludicrous 10 year arrangement with a lender and never informing the customer that that's the case..

Must also state that I also had to pay a fee at the time for their professional services so I find this clawback attempt more than distasteful in the light of their rather unprofessional conduct.

Opinions please?

ThisRegard · 13-01-2017 11:33am

What was specified in the terms of business he gave you to sign?

lawred2 · 13-01-2017 11:49am

ThisRegard wrote: »

What was specified in the terms of business he gave you to sign?

I have attached the relevant portion...

Sure it talks about the future - but that's rather unspecific. They subsequently failed to disclose what anyone would consider a material aspect of the loan agreement that they put forward... Full disclosure is supposed to work both ways.

Melendez · 13-01-2017 12:15pm

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L1011 · 13-01-2017 12:31pm

The terms of business you agreed to doesn't even cap it at 3 years so not mentioning 3 years didn't change anything.

You agreed to recompense them if there was a clawback; and now there has. You could have asked them for the details of this when looking to change - it may have made the change less attractive if worthwhile at all.

lawred2 · 13-01-2017 12:32pm

Melendez wrote: »

This post has been deleted.

I 110% understand that. No problem whatsoever with how they make their money. But that doesn't in my eyes make exception for failing to disclose materially pertinent information.

My neighbour is a solicitor. I'm going to have a little chat with him - see what his take on it is.

lawred2 · 13-01-2017 12:33pm

L1011 wrote: »

The terms of business you agreed to doesn't even cap it at 3 years so not mentioning 3 years didn't change anything.

You agreed to recompense them if there was a clawback; and now there has. You could have asked them for the details of this when looking to change - it may have made the change less attractive if worthwhile at all.

So you see no obligation to disclose any such details then! Free for all for them to enter into any sort of commission based arrangement with the lender - full lifetime of the mortgage if they so desired - but never share that with the borrower. Not so sure about that really.

Of course the terms didn't cap it at three years - that's the whole point. They were general terms and conditions. If three years was explicitly mentioned in those terms and conditions - I wouldn't be in this situation nor would I have started this thread.

Henry Ford III · 13-01-2017 12:36pm

You should have enquired the extent of the possible clawback before switching.

_Brian · 13-01-2017 12:36pm

I suppose you did sign you would repay it in the future. Then was the time to query what exactly "future" meant.

lawred2 · 13-01-2017 12:37pm

_Brian wrote: »

I suppose you did sign you would repay it in the future. Then was the time to query what exactly "future" meant.

they wouldn't have been able to answer themselves at that time...

Melendez · 13-01-2017 12:43pm

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lawred2 · 13-01-2017 12:51pm

Melendez wrote: »

This post has been deleted.

thanks - that's good advice

Melendez · 13-01-2017 12:52pm

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lawred2 · 13-01-2017 12:58pm

Melendez wrote: »

This post has been deleted.

That's a good point too but mistakes do happen... he said himself that it had been ages since anyone redeemed a mortgage 'early' because banks weren't actively seeking new business for a long time which they are now. Complacency slips in. He also sounded far from sure of himself when I said I wasn't informed about this three year period.

joeguevara · 13-01-2017 1:04pm

Melendez wrote: »

This post has been deleted.

You cant go to the FSO until you have exhausted the complaints process with the brokerr. Put in a formal complaint outlining your case. Once they have given their final response (cannot be longer than 40 days) you can then go to the Financial Services Ombudsman. If you go without doing the above they will just bounce you back to the broker.

lawred2 · 13-01-2017 1:05pm

joeguevara wrote: »

You cant go to the FSO until you have exhausted the complaints process with the brokerr. Put in a formal complaint outlining your case. Once they have given their final response (cannot be longer than 40 days) you can then go to the Financial Services Ombudsman. If you go without doing the above they will just bounce you back to the broker.

Yeah was just reading the FSO website. I will be doing that.

Fries-With-That · 13-01-2017 2:14pm

Just curious, why were you signing a contract that included a clawback of commission clause if you were paying the broker for his professional services.

It appears to me, and I am not fully aware of the particulars of your case if you pay a broker for his services and the banking institution pay him for his services he has been paid twice for providing the same service.

I have never paid a broker separately for his services he is paid by the banks and insurance companies whenever I use his services to purchase a financial product.

I would ask your broker what exactly your payment to him covered and did this fee not exclude you from an onus to pay any future clawback.

Best of luck.

Wheety · 13-01-2017 2:27pm

Fries-With-That wrote: »

Just curious, why were you signing a contract that included a clawback of commission clause if you were paying the broker for his professional services.

It appears to me, and I am not fully aware of the particulars of your case if you pay a broker for his services and the banking institution pay him for his services he has been paid twice for providing the same service.

I have never paid a broker separately for his services he is paid by the banks and insurance companies whenever I use his services to purchase a financial product.

I would ask your broker what exactly your payment to him covered and did this fee not exclude you from an onus to pay any future clawback.

Best of luck.

It says in the attachment that they were acting without fees and rely solely on commission.

BeardySi · 13-01-2017 2:35pm

Wheety wrote: »

It says in the attachment that they were acting without fees and rely solely on commission.

OP also says

Must also state that I also had to pay a fee at the time for their professional services so I find this clawback attempt more than distasteful in the light of their rather unprofessional conduct.

Could it be a case that the timescale involved for a clawback would vary with individual mortgage products/banks so OP should have been made aware of it when getting the actual mortgage rather than in the general terms?

Fries-With-That · 13-01-2017 2:51pm

Wheety wrote: »

It says in the attachment that they were acting without fees and rely solely on commission.

True, but I was taking the OPs word for it, that he had also paid the broker.

lawred2 · 13-01-2017 2:53pm

Fries-With-That wrote: »

True, but I was taking the OPs word for it, that he had also paid the broker.

I did - there was a fee payable to them for their services in advance.

bmwguy · 13-01-2017 2:58pm

lawred2 wrote: »

I did - there was a fee payable to them for their services in advance.

Well that's a contradiction to your terms with them in the attachment you posted. I never paid my mortgage broker directly, it was commission only.

How much is he looking for from you? Clawbsck terms between him and the bank are usually reducing as time passes. Although yours is relatively new

lawred2 · 13-01-2017 3:03pm

bmwguy wrote: »

Well that's a contradiction to your terms with them in the attachment you posted. I never paid my mortgage broker directly, it was commission only.

How much is he looking for from you? Clawbsck terms between him and the bank are usually reducing as time passes. Although yours is relatively new

Yes I suppose it would be. But pay them I did.

It's just under about 50% of the original commission. Between the upfront fee and the over 50% commission that hasn't been clawed back they are still reasonably well quids in.

davo10 · 13-01-2017 4:05pm

So, the mortgage broker advises you and does the leg work, you agree to pay if there is a claw back if you change mortgage providers in future, you do change mortgage providers presumably to get a better rate, the mortgage broker then loses money because you changed mortgage providers and his fees are clawed back through no fault of his own, and now you are refusing to pay even though it is in the T&c's you signed?

Am I missing something here?

lawred2 · 13-01-2017 4:06pm

davo10 wrote: »

So, the mortgage broker advises you and does the leg work, you agree to pay if there is a claw back if you change mortgage providers in future, you do change mortgage providers presumably to get a better rate, the mortgage broker then loses money because you changed mortgage providers and his fees are clawed back through no fault of his own, and now you are refusing to pay even though it is in the T&c's you signed?

Am I missing something here?

Yes.

davo10 · 13-01-2017 4:07pm

lawred2 wrote: »

Yes.

Which is?

lawred2 · 13-01-2017 4:11pm

davo10 wrote: »

Which is?

Failure to disclose the basic parameters by which I would be rendered liable for any claw back.

That bit.

Try reading the next time.

L1011 · 13-01-2017 4:12pm

lawred2 wrote: »

Failure to disclose the basic parameters by which I would be rendered liable for any claw back.

That bit.

Try reading the next time.

The terms of business contains the parameters under which you became liable, though.

davo10 · 13-01-2017 4:13pm

lawred2 wrote: »

Failure to disclose the basic parameters by which I would be rendered liable for any claw back.

That bit.

The broker's fees are clawed back by the mortgage provider, "that bit" would be in the mortgage offer you recieved from the bank. Different banks have different terms during which if you redeem the loan there are penalties or claw backs. The broker can't put a specific time frame when you sign the initial agreement because the broker will not know in advance which lenders will offer you a mortgage and what their terms will be.

The term of the "future" period for clawback is therefore dependent on the lender, not the broker. Read your mortgage documents.

Leprechaun77 · 13-01-2017 4:46pm

This is a bit of a tricky one, but a few points below.

A mortgage broker needs to be paid for services provided throughout the mortgage process, from advice at outset to the actual processing of the application. Most Irish people don't want to pay for this service as it has always been included free (broker paid by commission).

This clawback clause was no doubt inserted to cover them from people switching mortgages early and being hit with a debt from the mortgage provider for commission clawback. I presume the fee at outset covered the initial meeting for advice and sending in the application. It likely takes a lot more man hours to process the full application, together with the costs of running a business in general. (I would presume there are a lot of dud applications that never go ahead and so they probably lose out too)

The OP is obviously smart enough to watch his finances and as such has switched mortgage provider, presumably to save money. I don't believe he has given a thought to the mechanism that allowed him to get the advice (and processing etc) in the first place and is trying to get out without paying....however.....

The terms and conditions that he signed are so non-specific with regard to this clawback that I believe the broker is on thin ice with regard to this. This looks like a standard 'cut and paste' paragraph that was not properly thought out. On the basis that the OP was not informed, before or afterwards, of the amount and term of any potential clawback, I believe that it can not be enforced (I admit that I am looking at this from a Consumer Protection Code angle, rather than a qualified legal practitioner's). As a similar comparison, I would note that the cash back offers of 2% on mortgages that were advertised on TV from some banks DO clearly outline a liability to repay this if the loan is redeemed within a certain amount of time.

OP, I would write a letter to the broker to outline the your position and the fact you were never informed of the exact nature of the clawback (amount/duration/method of calculation). On this basis you feel it is unjustified etc.

Paulw · 13-01-2017 4:56pm

Leprechaun77 wrote: »

I would write a letter to the broker to outline the your position and the fact you were never informed of the exact nature of the clawback (amount/duration/method of calculation). On this basis you feel it is unjustified etc.

But, surely the terms (amount/duration/method of calculation) are done by the bank, and would change, depending on the actual bank used, the term of the mortgage, the duration up to when the change was made, how much commission was paid by the bank to the broker, etc? The broker can't always know these exactly as many are down to the conditions of the actual mortgage. That is probably why the contract may seem so vague?

There may be some weird maths formula behind it all, but this is more likely set by the bank, than by the broker. They just want to claw back the difference between what they should be paid and what they were actually paid.

It's a complex enough situation, between the bank, broker, OP and then the changing of the mortgage.

Mortgage Broker seeking clawback of commission

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