Real estate agents could be affected by changes to consumer credit laws
Does your business engage in the provision of credit to consumers?
Does your business refer clients tot a preferred provider of credit and in doing so make specific recommendations about the types of credit products or provide “credit assistance” such as assisting with filling out the credit product forms?
If you answer yes to the above questions, the National Credit Act (NCA) may apply to your business. Any business that participates in credit activities must first register with ASIC prior to 30 June 2010 and obtain an Australian credit license after 1 July 2010.
The registration and licensing process places significant compliance obligations on any person wishing to participate in consumer credit activity. The law also regulates responsible lending for the first time.
You are engaging in a credit activity if you are:
- providing credit by way of a credit contract or consumer lease
- providing “credit services” which includes acting as an intermediary between the lender and a consumer in connection with a credit contract
Credit for consumers
Credit for consumers is where the credit is provided for wholly or predominately for personal, household or domestic purposes.
This includes: home loans, personal loans, credit cards, consumer leases, overdrafts, line of credit accounts, sales by instalments and loans for investment properties which are of a residential nature.
The NCA does not apply to credit that is provided for business related purposes.
You may not need to register or apply for a credit licence if:
- you only engage in credit activities on behalf of someone else who is registered or has a credit licence
- you provide referrals to a credit provider and the referrals are merely to the provider on no more than an introductory basis
- You refer your client Mary to John at XYZ Home Loans in order for her to secure a loan for her proposed residential property purchase. You merely provide Mary with information on how to contact John. You do not refer to any specific products or services.
- If however you refer your client Mary to John at XYZ Home Loans and you specifically detail the type of credit contract or credit products she should obtain from XYZ Home Loans, or you assist her to fill in the credit contract forms, or suggest she increase the credit limit on her home loan mortgage, you may be required to be licensed or to be an authorised representative of a licensee under the NCA as you may be deemed to be providing “credit assistance”.
Disclosing commissions or benefits
As also required by the Estate Agents Act and the Estate Agents (General, Accounts and Audit) Regulations, any benefits including commissions received for referrals must be disclosed to your client under the NCA.
Mason Sier Turnbull Recommendations
The NCA compliance regime is rigorous and Mason Sier Turnbull can assist your business in the transition to the new regulatory environment by providing services that include:
- advice on the implications of the NCA
- advice on the responsibilities and obligations as required once registered with ASIC
- preparation of documentation for licence applications
- advice as to the ongoing responsibilities and obligations placed upon licence holders
Contact one of our Corporate Advisory lawyers if you have any queries regarding the NCA licensing registration and compliance
Authors: David Boyall & Susan Reece Jones