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Finance Brokers Screwed

22 September 2010

We've been running campaigns to stop unfair contracts against self-employed people.

This includes:
  1. Exposing bad contracts.
  2. Establishing a Charter of Contractual Fairness.
  3. Pushing for legislative change for fairness
Now we look at an unfair contract affecting finance brokers in Australia.


The contract is a standard form contract used by a high-profile finance business with its commission finance brokers. The contract sets out the arrangements under which the finance brokers will be paid commissions on finance deals they secure with consumers. The commissions include upfront and trailing commissions on long-term finance arrangements.

The 'unfair' contract clauses

We have reviewed the entire contract being used and have extracted those clauses that we believe are 'unfair'. Our criteria for unfairness are the unfair contract provisions in the Trade Practices Act for consumers and which ICA believes should apply to self-employed people. We have incorporated these principles in our Charter of Contractual Fairness.

The unfair contract clauses on our evaluation are as follows [our editorial deletions and changes inside square brackets]:

Definitions; '[The Company's] Policies means [The Company's] policies as they may be varied by [The Company] from time to time at [The Company's] absolute discretion.'

Restraint Period; effectively 24 months unless the contractor can litigate.

Clause 2.2 Requires the contractor to work exclusively for [The Company] and 'devote their whole time and attention to the business of [The Company]' And 'must not do any other work unless with the prior consent of [The Company]'

Clause 3.2 (c) '[The Company] may withdraw accreditation to perform the services at any time'.
Clause 3.10 The Contractor agrees to abide with all [The Company's] polices 'as advised by [The Company] from time to time.' [Note: company policies can be changed at any time effectively changing the contract]

Clause 9. (a) contractor will not 'have any interest in or be involved in any business which in the reasonable opinion of [The Company] is engaged or concerned in competition with or provides the same or similar products to [The Company]'

Clause 10 (d) 'we may vary products available for marketing by you at any time, and we can withdraw your right to market some or all products even if we are still allowing other contractors to sell those products.'

Clause 13.1 'You agree that it is a term of this Agreement that you must strictly meet all KPIs [Key Performance Indicators]'
Clause 13.2 'You acknowledge that new KPIs and KPI targets may vary as advised by [The Company] from time to time and that compliance with those new KPIs and KPI targets constitutes a condition of this Agreement'

Clause 14.3 'You agree that [The Company] may declare and determine the amount or rate of commission payable etc'
Clause 14.4 'We reserve the right to vary the basis upon which you are remunerated, the rates of commission and other information etc'
Clause 14.5 '[The Company] calculation and determination of any commissions or other benefits payable to you is final.'
Clause 14.8 'During the term of this Agreement and at any time after the Termination Date, if any commissions or other payments have been paid to you where in the reasonable opinion of [The Company] you are not entitled to such payment etc such commission or payments must be repaid by you to [The Company] on demand etc'

Clause 16.1 '[The Company] may at its discretion immediately suspend your rights to market our products etc'

Clause 17 Immediate Termination; 'this Agreement may be terminated immediately at any time by us giving notice to you if, in our opinion, any of the following events occurs'
Clause 17.1(b) 'you breach any of [The Company] policies'
Clause17.1 (l) 'you engage in any conduct that is in the sole opinion of [The Company] likely to injure [The Company] reputation or commercial interests.'
Clause 17.1 (m) you do not comply with the Minimum Performance Requirements specified in the Addendum'

Clause 19.1 'In the event that this Agreement is terminated ... we will notify [specifies a wide number of people and organisations] of the circumstances giving rise to the termination'
Clause 19.2 'You agree not to make any claim against [The Company] in respect of an notification made pursuant to clause 19.1'

Clause 20.3 'If this Agreement is terminated pursuant to clause 17.1 you will not be entitled to any commission or other payment etc'

Clause 21.4 'Subject to the entitlement of [The Company] to unilaterally vary the rates of commission and other information specified in the Addendum ...'

The effect of these clauses

The contract enables the company without reference to, consultation with, agreement from, or appeal by the finance contractors to:
  • Change every, and any aspect of the contract.
  • Change the key performance indicators used to evaluate the finance contractors' performance.
  • Change the calculations upon which the finance contractors' commissions are computed.
  • Cease paying the contractor/s.
  • Terminate the contract.
  • Restrict the finance products the contractors may sell.
  • Force the contractors to pay money to the company.
  • Potentially harm the reputation of the contractor/s and deny contractor/s the right to defend their reputations.
In addition, the contract:
  • Forces the contractor/s to work only for the company.
  • Prevents the contractor from having any other business interests in the finance field when working for the company.
  • Prevents the contractors from working for anyone else in the finance related field for periods of up to two years after leaving the company.

ICA commentary

This is a shocker of a contract. It is totally oriented towards protecting every and any conceivable interest of the company. It would enable the company to 'thieve' from the finance contractors because it literally turns 'theft' by the company into a permissible and arguably legal action under the contract.

There is absolutely none of the balance in the contract that should give both the contractors and the company mutual rights and obligations towards each other.

This is a master--servant contract under the pretence of a genuine commercial contract. It is this sort of contract that spurs ICA to continue its fair contracts campaigning, no matter how long it takes for us to achieve success.

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