Brokers have expressed outrage at a recent move by Firstfolio to impose a fee on non-performing originators.

The $150 per month fee will be deducted from the commission payments of brokers who have failed to settle at least three loans with Firstfolio in the past 12 months. The fee came into effect from 1 August.

In a broker communication from the company, Firstfolio indicated the fee was an amendment to its broker origination agreement. However, a spokesman from Firstfolio promptly told Australian BrokerNews the fee had always been part of its agreement with brokers, and was only now being enforced.

Tony Inglis of Educated Finance & Property called the fee "harsh and unjust". He told Australian BrokerNews he no longer felt comfortable referring clients to Firstfolio due to deteriorating service levels.

"Firstfolio should be the first people to put their hands up and say that they have dropped the ball with regards to customer service, so how can I refer them new business when they cannot provide a satisfactory level of customer service? Yet they penalise me for not referring them new business even though they cannot provide a reasonable service proposition," he said.

Inglis argued that the fee was excessive, and did not reflect the true cost of administering commission payments. But Firstfolio has contended that the fee - which will affect around 80 of the company's 300 accredited brokers - reflects the ongoing compliance costs associated with maintaining non-performing brokers.

"There is increasing compliance cost to maintain a broker's accreditation. This compliance cost is not able to be offset where a broker is not submitting any loans. The cost of maintaining accounting and admin costs in relation to commissions and in customer management queries that brokers should be handling is a fixed cost and increases relative to interest margin when a broker's loan book is in run off mode," a Firstfolio spokesperson said.

Inglis questioned this rationale, calling the fee a "money grab".

"It cannot be defended that the fee isn't payable if a broker is introducing new business. The two things are mutually exclusive. If in fact there was a cost of $1,800 per annum to pay my commission, then writing new loans would not pay this fee," he commented.

Another broker who wished to remain anonymous echoed Inglis' remarks, saying the company's service proposition made it difficult to refer clients. The broker called the move "aggressive", and said smaller lenders should be sympathetic to struggling brokers rather than imposing new fees.

Firstfolio answered the claims that its service proposition had suffered, and told Australian BrokerNews providing a high level of service to both brokers and borrowers is a priority for the company. However, it argued that brokers often fall short on service as well.

"On the flip side, some of our customers are unhappy with their brokers. Whether it is product related or in regards to undertaking a variation, the broker is at times not available to address these issues. It is left to Firstfolio to manage the client and to re-explain how certain accounts work. This is undertaken at no cost to the broker," the company said.