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:
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:
The prohibition does not apply to home loans. However, home loans is defined in the Instrument as meaning:
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:
This is a short summary of reasonably complex provisions. Businesses who may be affected by this prohibition should seek expert advice.