Option 3: Rely on the referral exemption

There are two exemptions to being authorised under an ACL, or holding an ACL, which will allow you to refer clients to a licensee: a basic exemption and an expanded exemption.

The basic exemption allows you to provide your client with information about how they can contact a licensee that is able to provide credit activities; for example, a finance broker or a credit provider. At the same time, you must disclose to the client any benefits that you may receive from the licensee for making the referral. This is fairly straightforward and you may be already doing this.

The expanded exemption allows you to pass on your client's contact details to a licensee. To do this you are required to do the following:

  1. have an agreement in place between you and the licensee;
  2. have the client's consent to have their name and contact details provided to the licensee;
  3. provide the licensee with the client's name and contact details within 5 business days;
  4. disclose to the client any benefits that you may receive from the licensee for making the referral; and
  5. not charge the client a fee for the referral.

You cannot rely on the expanded exemption if your principal business is referrals. There are additional obligations on the licensee when the expanded exemption is used.

Option 4: Avoid providing credit assistance

After doing a bit of research you may decide that credit assistance is not something that your business is interested in.

Here are some tips to avoid unintentionally being caught by the licensing regime:

  1. Keep any discussions about credit generic. Yes, you can talk about the benefits and disadvantages of a class of credit product. Avoid talking about any particular credit provider. Do not mention particular credit products. If you start telling your client that ANZ's simplicity plus home loan would be great for them (or they should retain that particular product), you have crossed the line and need to be operating under a credit licence.
  2. If a client comes to you for help filling out an application for a loan for an investment property, politely decline and refer them to a broker or the credit provider. Although it is called credit assistance it is easy to focus on the advice aspect and forget that assisting someone to apply for credit is also caught.
  3. As soon as any client starts mentioning credit, stop them and say "I can't help you with that but I know a great broker who can. Can I give you their details?" Immediately referring your client to someone who is authorised to provide credit assistance keeps you out of trouble and ensures that your client will get help from someone who knows what they are talking about.
  4. In your Statement of Advice, state that your advice does not involve any suggestion that they enter into, remain in or increase the credit limit of a particular credit contract with a particular credit provider. If assistance is required in any such matters, they should seek assistance from an appropriately licensed or authorised person.

A final word

From time to time we see licensing requirements driving an organisation's business model. This seems to us to be the wrong way around. Surely, it is better to identify business goals and develop strategies to achieve those goals. These strategies will include consideration as to whether an ACL is necessary, desirable or both.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.