The Finance Brokers Association of Australia remains in ongoing discussions with Treasury and key profile industry stakeholders regarding the proposed funding model for the the corporate watchdog.
Under its second proposed funding model delivered to industry last month, Treasury wants Australian Credit Licensees (ACL) to pay a yearly base fee of $1,000.
For those ACL-holding intermediaries (brokers), an additional levy of $1.14 for every extra $10,000 they write above a $100 million threshold is also proposed.
FBAA executive director Peter White says many questions need to be asked about this model and most cannot be answered at this stage because of the limited data available.
“From what we know, the FBAA argues this model will not deliver a fair and equitable outcome. Furthermore, at the last critical meeting with Treasury where the FBAA was the sole association representing brokers, we were advised that the maximum that ASIC can recover is $15.8 million,” Mr White said.
“There are too many unknowns to support the proposed model and ACLs would end up paying much more of the $15.8 million needed to fund ASIC’s Cost of Recovery.”
Mr White also argues the $1.14 levy could seriously erode the financial viability of smaller ACL holders, who could fragment to ensure they remain under the $100 million threshold and not be liable for higher costs.
He noted that the $1.14 levy could be as little as five cents but more data is needed to make this determination, which the FBAA has called for.
“These fees will also create entry barriers, increasing the risk of driving ACL holders back to being credit representatives. This could shrink the pool of licences from which to recover costs, leaving a bigger burden on those who remain.”
The FBAA believes additional costs being proposed are also unfair.
“They want us to pay for the cost of financial literacy which really has nothing at all to do with funding ASIC’s costs of recovery action from broking,” Mr White said.
“We are also not prepared to see this fund any potential vicarious claims or undertakings against brokers which result in actions that rule against ASIC.”
Mr White said face-to-face talks will continue between the FBAA, Treasury and ASIC, and the relevant minister where necessary, and stressed that any implemented funding model won’t launch until 2019, not 2017 which has been erroneously reported.
Meanwhile, the FBAA has expressed its displeasure at the last-minute decision to grant an extension to the deadline for industry submissions which has now been pushed back to the middle of January.
“Everyone knew they had six weeks to submit their industry papers and it is plainly unfair and unacceptable that those who couldn’t organise it in time are rewarded with an extension,” Mr White said.
“We have received a formal apology from Treasury for not informing all relevant stakeholders about this extension as it is not industry-wide, which the FBAA only knew of when it was about to submit its paper on the initial due date.”
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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