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The corporate regulator the Australian Securities and Investments Commission (ASIC) has pushed back the start date for the registration and licensing of brokers by six months – to the disappointment of many in the industry who have been eagerly awaiting the start of the new regime.
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Originally scheduled for 1 November, brokers will not be able to apply for an Australian Credit License until 1 April next year.
The announcement by Chris Bowen, the federal minister for financial services, followed a Senate Economics Committee recommendation that the credit industry be given more time to prepare to transition to the new regime.
Gadens Lawyers banking and finance partner Vicki Grey says ASIC was forced to delay the start date of the new licensing regime because the government was simply unable to pass the new laws within a short timeframe. She says this is not a bad thing.
“The government has worked hard to bring in the legislation on time. However, the new reforms are so complex that it has become unfeasible for them to meet their November deadline. As such, they have pushed it back into next year which is very sensible,” says Ms Grey. “The states also required more time to transfer their powers to the Commonwealth.”
But although it appears the delay was unavoidable, AFG general manager for sales and operations Mark Hewitt says it is disappointing.
“We believe the postponement of the legislation is simply ASIC’s way of catering to the lowest common denominator – those who have not yet made the necessary adjustments to their business,” Mr Hewitt says.
Mr Hewitt says the aggregator has been hard at work preparing for the new regime and had all the necessary pieces of the puzzle in place.
“We are certainly disappointed by the delay. We are eager for the national reform to come into play and the sooner it does, the better it will be for our members and customers alike.”
Mortgage Choice chief executive officer Michael Russell agrees the delay is a disappointing result for those parts of the industry that have already begun the process of adapting to the new regulations.
“From a home buyer’s perspective, we are keen for the legislation to come into effect as soon as possible because it will give customers that extra bit of faith in their broker,” says Mr Russell.
While much of the detail of the legislation is still unknown, Mr Russell says brokers and franchisees have a general idea of what compliance will entail.
“The legislation is all about responsible lending, so the vast majority of successful brokers have already adopted this methodology in running their business – simply because it is the right thing to do by their customer,” Mr Russell says.
THE LICENCING ISSUE
Joe Sirianni, director of Smartline, says the main benefit of the new national regime is that it raises the bar when it comes to new entrants to the industry.
“At the very least, it will set some base requirements and standards prior to entry,” he says.
And although he does not believe licencing will solve the industry’s problems, Mr Sirianni says at the least it will create a formal gateway for entry by filtering, validating and holding brokers accountable to their customers.
While licensing is likely to go a long way towards improving professionalism in the industry, it is still unclear who will have to apply for and maintain licences.
Many brokers are uncertain as to whether they will need to apply for their own licence, or whether their aggregator or brokerage will obtain one on their behalf – no doubt their preferred option given the administrative effort that will be involved.
If brokers are forced to apply for their own licence, they will also have to assume the responsibilities that go hand-in-hand with operating under the new regime – rather than the onus being placed on the aggregator or brokerage to ensure the broker’s compliance.
Connective principal Mark Haron says it will give brokers the option of obtaining their own licence or operating under Connective’s licence.
“If a broker obtains their own licence, they will certainly have more independence and autonomy. They will also have the ability to move their business more freely,” says Mr Haron.
“However, we will also give our brokers the option of working under our license.”
Mr Haron says when ASIC issues clearer guidelines around the new licensing requirements, brokers will be in a better position to decide their preferred course.
“Some brokers will be forced into a particular agreement depending on their contractual obligations,” he says.
“However, many will be given the opportunity to choose which avenue they prefer once the specifications have been made available to the broker channel.”
