Australian Credit Licence

Hi Jamie

All that I've read on the subject so far says that yes, State based credit providers licences will become obsolete on 1 July 2010.

Also, nothing definite yet from ASIC on the cost of the ACL.

Cheers, Paul
 
the Fee from ASIC for an ACL will only be a minority of the cost im sure. Thats most likley to be the case if your business is more than a 70 k a year franchise office.

ta
rolf
 
the Fee from ASIC for an ACL will only be a minority of the cost im sure. Thats most likley to be the case if your business is more than a 70 k a year franchise office.

ta
rolf

FYI
http://www.theadviser.com.au/breaking-news/3731-mfaa-regulation-complaints-approved


MFAA regulation complaints approved
Tuesday, 25 May 2010

By: Jessica Darnbrough

The MFAA has successfully lobbied ASIC to amend the fee structure for sole traders outlined in the National Consumer Credit Protection Act.

Under the original Act, all incorporated companies would be required to pay a licence fee of $1,000 per annum, regardless of whether or not they were a sole trader operating through a company vehicle.

“When the fee structure was first discussed, we were led to believe that sole traders would only have to pay $450 for a licence each year,” MFAA chief executive officer Phil Naylor told The Adviser.

“However, when the regulation came out it said that any company would be required to pay $1,000. As such, any sole traders that were incorporated would also be required to pay this fee.”

“We made a complaint to Treasury, who have since amended the Act.”

Under the amendments, a sole trader is now defined as any natural person, or a person that has only one representative that engages in credit activities.

Separately, ASIC has clarified that licensees conducting servicing and other intermediary activities which are not directly related to lending or arranging a loan will pay $450 for a sole trader and $1,000 for other companies.
 
Re license cost for Companies/sole traders -

Don't you just love the fact that we are registering for a license they are still modifying and there are problems with the practicalities of the legislation !!

What have the MFAA been doing for the last 12 odd months that this has come out.

The last road show I went to told me that if someones hairdresser recommends me and I give the hairdresser a thank you movie ticket - the hairdresser has to be licensed !

We are supposed to then apply for a license within the next 6 months. Have we been given the documentation requirements ?? NO
We have only been told there will be up to 6 extra documents for the clients to sign and clients must have a copy.

So I logged onto the UK FSA site to take a look a what we could expect. This will come as a bit of a shock as to what is required -

"KEY FACTS ABOUT OUR SERVICE"
"FACT FIND"
"SUITABILITY CHECKLIST"
SUITABILITY LETTER SENT
CONTACT HISTORY NOTES ( already doing this one )
KFIs provided.
MORTGAGE OFFER LETTER SENT with associated documents.

add to this - MFAA broker contract ( which still does not protect the brokers relationship with the client allowing for bank churning)
APPLICATION FORM AND PRIVACY STATEMENT
FINANCE SUMMARY PAGE
SETTLEMENT LETTER

So with our contracts to have 5 day finance clauses and settlement in 30 days...... what bull. Oh and bank staff are again exempt because they are covered by APRA !!!
 
"KEY FACTS ABOUT OUR SERVICE"
"FACT FIND"
"SUITABILITY CHECKLIST"
SUITABILITY LETTER SENT
CONTACT HISTORY NOTES ( already doing this one )
KFIs provided.
MORTGAGE OFFER LETTER SENT with associated documents.

add to this - MFAA broker contract ( which still does not protect the brokers relationship with the client allowing for bank churning)
APPLICATION FORM AND PRIVACY STATEMENT
FINANCE SUMMARY PAGE
SETTLEMENT LETTER

I'm actually not too concerned.

Key facts about our service - nothing more than a customized adaptation of what's already in the standard MFAA broker agreement.
Fact find - presented properly, this can be a good opportunity to cross sell.
Suitability checklist & letter - make it part of the fact find.
Contact history notes - good brokers should already be doing this.
KFIs - not sure what this is, but I suspect it's a product disclosure/comparison. This can be a great tool to build the clients confidence.
Mortgage offer letter - Already doing this at unconditional.

Most of this stuff is not much more than a minor adaptation of what should already be best practice. For me the pain in the neck will be the license application process itself.

The nice thing is that if you do all this properly, clients either won't have any reason to make a complaint, or they will have little chance of winning any complaint as the path to the recommendation should be clear and they'll have signed off on it.

Not too concerned about the referral process that a lot of people have been making a fuss about. Whilst ASIC might not like rewarding unlicensed referrers, they'll have an uphill battle going after the referrer who likes your service, or proving that it resulted in bad advice if the broker is fully compliant elsewhere.

I just look at all this as yet another challenge to meet. The last few years have been rough for brokers, but those who've come this far tend to have a better business as a result. Licensing will get rid of more dead wood and make the ones that embrace it stronger.
 
Hi Pete

In general I agree.

I feel that part of the challenge is that there are currently so many loose ends to the idealogy of the legislation that will need to be sorted as we go. Lack of clarity causes doubt, and this doubt overshadows many of the positive outcomes.

For me, the the best part will be a much simpler national approach to making sure that all legislative needs are met. My clients are already getting "ok advice" ( I think Im a great car driver too :) )

The biggest elephant that needs resolution is just what constitutes bad advice ?

Many ( est 1 in 5) of the investors that we see, whose structures have been derived from branch advice are structurally WRONG (in my opinion), and have compromised the borrowers position in some way, with an "unfair" current or contingent benefit to the lender............................

Many existing broker clients arent in a much better placed position.

I doubt though the legislation per se will fix those contentious issues for a long while.

AGAIN this week, like most weeks, we have some work on our hands trying to help a client out of a pickle thats been caused 90 % by what I see as really poor advice, with the client being potentially 100 k out of pocket.

Running a bunch of applications to a range of lenders even though a simple policy and servicing check would have shown a RED FLAG before submission to half the applications.

Clients CRAA and credit score is thus fried..............I know for a fact that lenders direct often arent any better, and in many cases worse.

While we are all human and often make errors of judgement, thats not the case with most of these things we see. They are often caused by systemic problems, not one offs.

Cert IV doesnt teach you about this sort of stuff, and obviously most of the lenders, broker companies and aggs arent doing a great job equipping their people with either tools or knowledge.

While there is a strong SALES focus, and to get the client " off the market", rather than provide "quality advice", the legislation will not have done its job.

The problem from the sales end is that a proper advice approach usually requires much experience, strong self confidence, and a willingness to walk away from business if your client wont do the "right thing".

I suppose the saving grace is that the majority of borrowers will only ever have one property...........and thats mainly where the legisltion is focussed.

ta
rolf
 
I've wondered myself what constitutes bad advice. I see similar problems all the time (last week a bank manager told a customer, "I didn't want to set it up that way because it's not in the banks best interests").

Unfortunately I don't think the legislation will stop bad advice on structural issues. The legislation states the loan must, "not be inappropriate". As Rolf has also identified, some of this also comes down to ideology. If the loan is affordable for the customer and gets them the property they want to buy, it's hard to demonstrate the loan is inappropriate, even if it's not structured with the customers interests first.

CRAA hits for the most basic inquiry can destroy future application success, it would be nice to put an end to this practice (they don't even get written permission to do it). Again the banks will simply call it common practice, document it as being part of their due diligence process and thus entirely appropriate, never mind the potential consequences later on.
 
COSL mix up

We are applying for license and our contract brokers as credit representatives. In order to get all that in place the brokers have applied with COSL to sign up as credit representatives under our umbrella. COSL have a specific application for this and charge $75 each - I spoke to COSL before proceeding and believed I was applying for something that covered our ASIC requirement.

Two days ago COSL send an email stating "You have received this email because you are listed on our records as a contracted / non employee representative of a current COSL Member. Please note that as a listed Representative (contractor / non employee) of a COSL Member you do not have membership of COSL in your own right ...The new national credit laws require you to join COSL directly before you can either Register with AISC for a licence or be appointed as a Credit Representative of your principal (licensee)"

I have asked COSL why they accepted our applications and continue to proceed with the applications and they have not replied. I rang ASIC and they state the act does not stipulate what sort of EDS membership you have as long as you have it. ASIC also has no information or application form available for the appointment of credit representatives so we don't know what the requirements are for the agreement - certainly the MFAA/Gadens document is pretty draconian completely slanted to the licensee's benefit and influence. An interesting comment is posted here : http://www.independentmortgage.com.au/
 
COSL have just clarified that their email related to existing 'representatives' not 'credit representatives' being appointed by licensee - phew!!!
 
Conflict of interest

Has anyone noticed that a conflict of interest is not able to be dealt with by a disclosure ( as is the case with FPs) -we (brokers) have to ensure that our conflict of interest does not disadvantage the customer and as I think Rolf pointed out how is disadvantaged defined. Gadens suggest in one breath that suitable disclosure should suffice but then say "Unless a sensible interpretation is applied, the provision becomes impossible to comply with" - I haven't seen any interpretation from ASIC have you?
I would say that every low doc inquiry I get at the moment raises a conflict of interest over the income requirements that I have and lenders don't to the extent I can't write most of the business.
 
Has anyone noticed that a conflict of interest is not able to be dealt with by a disclosure ( as is the case with FPs) -we (brokers) have to ensure that our conflict of interest does not disadvantage the customer and as I think Rolf pointed out how is disadvantaged defined. Gadens suggest in one breath that suitable disclosure should suffice but then say "Unless a sensible interpretation is applied, the provision becomes impossible to comply with" - I haven't seen any interpretation from ASIC have you?
I would say that every low doc inquiry I get at the moment raises a conflict of interest over the income requirements that I have and lenders don't to the extent I can't write most of the business.

The fact that you are currently subject to the NCCP and ADIs aren't, isn't a conflict of interest in terms of the act.
 
The conflict is that I know my client can get a much better deal going direct and if I ignore that then that is arranging a loan that is potentially unsuitable ( higher costs and fees) may be in breach of the act
 
Yep just been informed by AFG all lo-doc loans must also include accountants letter to verify income. However Banks will not be required to do this until 1st Jan 2010.

We also have two months into regulation a new set of requirements to an already pathetic mish mash of a fact find.

We never seems to do anything with any professionalism in this communist/socialist country.
 
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