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A new law commencing on 1 November 2018 prohibits arrangements
where introducers are provided with a delivery rate to which
introducers can add a margin to determine the borrower rate –
subject to some exceptions. Lenders, brokers, and other introducers
need to ensure that their commission arrangements do not breach
these rules.
The ASIC Credit (Flexible Credit Cost Arrangements)
Instrument 2017/780 inserts new provisions into the
National Consumer Credit Protection Act 2009.
The new law prohibits lenders directly or indirectly entering
into a flexible cost arrangement defined as an arrangement under
which both of the following apply:
the benefits paid to an introducer
are determined in whole or in part by the interest rate; and
the introducer or an associated
person can set or influence the rate.
In addition, if there is a flexible cost arrangement, lenders
must not pay introducers a fee which exceeds the
origination/administration fees agreed prior to the introduction of
the customer. Lenders must keep a record of the basis for
determining these fees for at least seven years.
Variations to interest rate influenced by introducers are not
prohibited:
which reduce the interest rate up to
2% per annum from the base rate quoted by lenders (being a
rate set prior to the introduction of the borrower); or
where benefits paid to introducers
are the same as would be paid if the base rate applied; or
where benefits are paid to:
directors or employees of the lender
/ lessor; or
related body corporates; or
directors or employees of related
body corporates.
The prohibition does not apply to home loans. However, home
loans is defined in the Instrument as meaning:
loans 100% used to purchase
residential property; or
loans to refinance loans wholly or
predominantly made to purchase residential property.
As a result all other regulated loans will be subject to the
restriction. For example, the prohibition would apply to loans
secured by residential property:
only partly used to purchase a home
(ie there was some money out for personal, domestic, or household
purposes);
only partly used to refinance loans
wholly or predominantly used to purchase residential property (ie
there was some money out for personal, domestic, or household
purposes).
This is a short summary of reasonably complex provisions.
Businesses who may be affected by this prohibition should seek
expert advice.
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Dentons is delighted to support a global IT services and consulting firm Miratech as an event host partner at their annual conference called M-Force18 New York on September 27th. The event will be held at Dentons New York office in the heart of Midtown Manhattan, opposite Rockefeller Center.
M-Force is an exclusive private networking event for Miratech clients, partners, and friends from around the world. M-Force attendees gather from a variety of sectors and disciplines to gain a deeper understanding of innovations being brought to market by Miratech and their Partners.
This seminar includes one ethics hour. Number of hours and credits are pending accreditation. This seminar is offered free of charge and is by invitation only.
BEAR is the latest in a long line of regulatory changes to impact the banking industry since the global financial crisis.
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