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ASIC to recover $9m from credit intermediaries

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Reporter 7 minute read

The financial services regulator has released indicative figures and its methodology for recovering the cost of its work for 2017–18, revealing that intermediaries — such as brokers — will need to cover more than $9 million.

As a result of laws passed in June, those that “create the need for and benefit from ASIC’s regulation will bear the costs”, which will be recovered through levies on regulated entities.

While the Australian Government will continue to determine ASIC’s total funding through the annual budget process, for 2017–18, $246.4 million of ASIC’s total budgeted resources of $387.7 million (approximately 64 per cent) will be recovered through levies on industry.

The industry funding model will recover the actual amount spent during the previous financial year, so levies will only be calculated and issued in the following financial year.


Therefore, regulated entities will need to submit information to ASIC between July and September each year, before receiving an invoice in January via the regulatory portal.

The first invoices will be issued in January 2019.

Credit intermediary charges

According to ASIC’s Cost Recovery Implementation Statement (CRIS), which has been released for consultation, there will be a graduated levy for credit intermediaries (such as mortgage and finance brokers), who will be charged on the number of authorised representatives the intermediary has at the end of the financial year.

There are reportedly 4,861 credit intermediaries and 36,149 credit representatives under ASIC.


In total, ASIC expects that its regulatory work for credit intermediaries will be $9.008 million for 2017–18.

A minimum levy of $1,000 will apply to intermediaries, but there will be no threshold for the graduated levy.

Those paying a graduated levy, such as brokers, will need to provide ASIC with information to confirm the “share” of the leviable activities in their subsector.

What the levy will cover

The regulator estimated that it will need $9.0 million to regulate credit intermediaries, with enforcement making up the largest chunk of this ($2.7 million), followed by property and corporate services ($1.324 million), IT support ($1.091 million) and surveillance (1.036 million).

According to ASIC, its regulatory work for credit licensees largely comprises “monitoring compliance with the National Consumer Credit Protection Act 2009 (National Credit Act) and taking appropriate action for non-compliance”.

“We also engage with stakeholders to ensure risks are identified and addressed and provide guidance to credit licensees about their legal obligations,” the commission said.

Its statement reads: “The intensity of our regulation depends on the services offered by a credit licensee (i.e., credit provision or intermediary services) as well as the scale of the licensee’s operation.

“For example, large credit businesses with significant customer bases present a greater potential risk to consumer wellbeing and market effectiveness than smaller institutions, and therefore require more regulatory attention.”

It continues: “To recover our costs to regulate credit licensees, we have applied a graduated approach with minimum levies: (a) For credit providers of loans that are not small amount credit contracts, the graduated levy is based on the provider’s share of the total amount of credit provided above the $100 million threshold each financial year. (b) For credit intermediaries, the graduated levy is based on the number of credit representatives the entity has as a proportion of the total number of credit representatives in the subsector.

“The credit licensee levies are generally cumulative — for example, if a credit licensee holds authorisations as a credit provider and a credit intermediary and provides both small amount credit contracts and regular loans, they are required to pay the levy applicable for all three subsectors. Each graduated levy is calculated separately and only relates to the licensee’s involvement in that activity or subsector.”

Meanwhile, the total budgeted costs to regulate credit providers is expected to be $17.861 million (with the largest chunk of this, $2.933 million, being for property and corporate services), while the total budgeted costs to regulate small amount credit providers (as defined in the National Credit Act) is $1.394 million (with the largest proportion of this, $0.320 million, being for surveillance).

ASIC to look at mortgages and high IO brokers

Looking forward, ASIC revealed that in 2017–18, it will commence reviews into loan fraud across the Australian home loan market, credit card practices and “the responsible lending compliance arrangements for large finance brokers and lenders with high proportions of interest-only loans”.

It will also continue its work in “promoting responsible lending practices and appropriate responses to financial hardship in the credit industry” and have a continued focus on “the risk of loan payment stress resulting from inappropriate lending and changing economic conditions, with a particular focus on non-lender gatekeepers and high-risk products (i.e., small amount credit contracts and consumer leases)”.

It stated that it would also conduct follow-up work with lenders regarding interest-only loans “to ensure our concerns about responsible lending practices in that market (specifically relating to meeting the consumers’ requirements and objectives) have been addressed”.

It highlighted that the figures outlined are indicative and may change when compared with ASIC's actual costs for the period.

A consultation on the CRIS is now open until 1 November.

ASIC said that it will take into account stakeholder feedback in preparing the final CRIS, which will be subject to ministerial approval.

It is expected that the final CRIS will be published in “early 2018”.

[Related: First ASIC invoices to be issued in January]

ASIC to recover $9m from credit intermediaries
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