Broker Regulation
A large proportion of the business of AELA members is introduced through brokers. However, the regulation of finance brokers varies markedly across the jurisdictions and by type of finance. In March 2003 the Australian Securities and Investments Commission (ASIC) released a report on the finance broking industry including options for reform, mainly in relation to mortgage brokers where instances of market failure and consumer detriment were identified. In December 2004 the Ministerial Council on Consumer Affairs (MCCA) released a discussion paper detailing options for a regulatory scheme for finance and mortgage brokers. This was followed by an outline of a package announced in December 2006 and a Consultation Package (draft Bill and notes) released by MCCA in November 2007. The draft legislation proposed licensing of businesses that provide advice or intermediation to ‘consumers’ (including “small businesses”) to secure credit. Numerous licensing, conduct and disclosure requirements were included. “Small business” credit as well as exclusive or first choice arrangements would have exemptions from some provisions including disclosure requirements and a written agreement.
Throughout the various consultation stages AELA had discussions and lodged submissions with officials seeking to minimise adverse impacts on financiers. These included: confining coverage to mortgage broking; the full exemption of commercial finance brokering from the regime; the full exemption of vendors (including dealers, retailers) arranging finance at point-of-sale from rules based primarily on the mortgage broking model. In addition AELA supported national template legislation.
In May 2008, the Productivity Commission’s final report, Review of Australia’s Consumer Policy Framework, recommended transferring regulation of credit providers to the Commonwealth Government and implementing the national licensing for finance brokers – at least initially based on the then current MCCA proposal. In June, the Minister for Superannuation and Corporate Law, released a Green Paper on the reform of financial services and credit regulation. The paper supported the Commonwealth regulation of mortgage brokers. Then in July the Council of Australian Governments (COAG) agreed that the Commonwealth would regulate mortgage brokers as part of a package which passes regulatory responsibility for credit from the States and Territories to the Commonwealth. AELA is involved in the policy deliberations underpinning this transfer and is concerned to ensure additional costs and liabilities and operational disruption are minimised.
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