An aggregator is offering its brokers a bonus commission if they were to write a specific volume of business over a period of time with one of the lenders on its panel.
Question: How does the broker manage this conflict of interest?
Answer: First and foremost, if the broker were to recommend this lender, the broker has to demonstrate that the loan product has to meet the client’s requirements and objectives. Once the broker has made the preliminary assessment that the loan product is not unsuitable, they have to disclose this conflict of interest in the Credit Proposal Disclosure Document by including an additional paragraph in the section “Estimated commissions payable to us” stating that volume based commissions may be payable for this particular loan product.
The broker would have to disclose specific loan volume and the bonus commissions payable if the figures are known an provided. For example, we would receive a bonus commission of $5,000 for writing $6 million of loans with ABC Lender for the 3 months period ending 30 June 2015.
Alternatively, if specific information about the bonuses is not provided, the broker has to include an additional disclosure that they may receive additional, volume-based commissions from this lender as noted in their Credit Guide provided to the clients.
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