Confused about the scope of credit representatives'
authorities? Can credit reps lodge deals off panel?
Many credit reps have been appointed by aggregators or master
Most brokers operate through a family company (primarily to
avoid employee/employer issues). In these cases both the company
and the individual need to be appointed as credit reps. This
differs from the Australian Financial Services Licence
(AFSL) regime, because the AFSL regime does not
have the concept of 'intermediary' which exists in the
National Consumer Credit Protection world. The credit rep's
company is an 'intermediary'.
Confusion arises when credit reps want to lodge a loan off
panel, for example, with a specialist lender or mortgage
There are two main kinds of appointments of credit reps. The
appointment may either authorise:
lodging deals only with the licensee's panel lenders;
lodging deals with the licensee's panel lenders or any
other businesses approved by the licensee.
So, there is no need for the specialist lender or mortgage
manager to appoint the broker a credit rep before the credit rep
can introduce the deal to them. Indeed, the specialist lender or
mortgage manager would not be able to appoint the broker as a
credit rep without the consent of the first licensee that appointed
the credit rep. It is unlikely that the first licensee will consent
because if a credit rep is appointed by more than one licensee,
those licensees can be jointly and severally liable for the conduct
of a credit rep. No licensee would want to be liable for conduct
relating to deals that had nothing to do with them.
The ASIC register does not indicate the extent of a credit
rep's authority. It simply says whether the credit rep has the
same authorities as the licensee. In most cases the answer would be
'no', because the licensee will hold broader authorities
and will have given the credit rep limited authority.
Accordingly, people dealing with these credit reps should ask to
see the appointment to ensure that the credit rep is authorised to
lodge deals off panel. Remember there are significant penalties for
dealing with someone who is unauthorised, and so it is important to
check the authorisation.
In the years following the global financial crisis of 2008 many Australian investors lost their life savings as financial products failed and the Australian Stock Exchange shed over 3,000 points.
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