[Joseph Esparza]

What is a banner year for an ISO? The answer might be: One that does not include a Claw-Back.

“The term clawbacks or claw backs can [also] be used to refer to any money or benefits that have been given out but need to returned due to special circumstances, which are mentioned in a contract”

Is it asking too much of ISO’s to surrender their trust to the diligence of the Funder’s underwriting, only to get tapped on the shoulder for the full return of his commission, should the deal go bad?

Or, should a rescission period be the best practice - where after the principle is returned to the Funder, ISO’s are in the clear?

[MCNetwork]

In the contracts I have with my funders, the clawbacks only occur if the deal goes bad within the first 30 days. After that period, the ISO keeps the commission for good. That's pretty reasonable IMO.

[AndyYSCISOdept]

In the contracts I have with my funders, the clawbacks only occur if the deal goes bad within the first 30 days. After that period, the ISO keeps the commission for good. That's pretty reasonable IMO.

I completely agree with you, but the problem we've found with clawbacks is that underwriters don't do as much due diligence as they would knowing they get no commission back. Its definitely a situation that you can go either way on.

[Finance1]

I've only seen 30 day clauses. I agree with MCN. Pretty reasonable. EPD's shouldn't pay comp and I don't think clawbacks influence underwriting either way. Commissions are a very small part of the exposure a funder has in the event of a default. If an underwriter has an unacceptable rate of default then they won't be around long.