No tick, no payment

Ms B was surprised when, after refinancing a loan, her adviser sent her an invoice for a “cancellation clawback” fee. She complained to the IFSO Scheme about it, saying she never agreed to it.

No tick, no payment

Ms B signed a contract for a financial adviser to source a home loan. Later, when Ms B refinanced the loan, she was surprised when the adviser sent her an invoice for a “cancellation clawback” fee, as indicated in the Service Fee of the contract.

The Service Fee box stated that if the product/service was cancelled within 24 months, Ms B agreed the financial adviser could “recover its costs” by charging her a “fee … to recover the cost of time spent by the Adviser and administration staff, and any medical examinations that are required.”

However, Ms B had not ticked the Service Fee box, so she said she wouldn’t pay the fee.

The IFSO Scheme found that, even if the Service Fee box had been ticked and Ms B had agreed to pay the fee, the financial adviser still couldn’t charge the clawback amount. It needed to more accurately reflect the time spent by the adviser and his staff, and had to inform clients of any fees or charges payable. If he failed to do so, he would be in breach of the Financial Markets Conduct (Regulated Financial Advice Disclosure) Amendment Regulations 2020.

The IFSO Scheme found there was no evidence Ms B agreed to pay the fee, or was given any details about it and, therefore, the financial adviser was not able to charge it. Ms B had also complained that the financial adviser breached her privacy, by posting about her loan on social media.

The IFSO Scheme believed that this breached the financial adviser’s obligations and Code Standards, noting Ms B could take her complaint to the Privacy Commissioner, or the Financial Markets Authority, if she chose to do so.

Complaint upheld

To comply with their legal obligations, Financial Advisers must provide information to clients about their fees, including cancellation clawbacks.

IFSO Scheme case ID 00219921

See the full case study.