Credit Representatives’ Authorisations

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 brokers.

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 manager.

There are two main kinds of appointments of credit reps. The appointment may either authorise:

• lodging deals only with the licensee's panel lenders; or
• 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.

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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.