The corporate regulator has provided “transition relief” for some credit representatives that have not yet obtained membership of the Australian Financial Complaints Authority.
Last month, members of the mortgage and finance industry, including aggregator heads, had voiced frustration and disappointment that some new brokers could be prevented from writing business due to delays with the Australian Financial Complaints Authority (AFCA) issuing certificates of membership.
Credit representatives who are currently CIO members had to apply for membership with AFCA by 31 August 2018, but membership certificates were delayed until 3 September 2018.
However, a communication from the Australian Securities and Investments Commission (ASIC) to the Mortgage & Finance Association of Australia (seen by The Adviser) suggests that further delays may have been affecting CIO members trying to make the switch to AFCA membership.
ASIC said: “ASIC understands that some licensees and credit representatives who are members of the CIO scheme have not yet obtained their membership to the AFCA scheme.
“ASIC understands that this includes licensees and credit representatives who: have lodged an application with AFCA Ltd, but membership has not yet been approved; and have not yet lodged an application with AFCA Ltd."
The initial deadline for credit representatives to register with AFCA was Friday, 21 September 2018 and the corporate regulator warned that firms that do not apply for membership could lose authorisation to act as financial services and credit representatives by breaching provisions under the National Credit Act.
However, it said that it would be “giving transitional relief to prevent authorisations from becoming invalid” given the circumstances.
ASIC said that CIO credit representatives affected by the changeover delays would be granted relief as long as they “make sure [they]maintain [their] membership to the CIO scheme" (warning, “if you do not, your authorisation will become invalid, and you will need to cease providing credit activities”) and ”apply for membership to the AFCA scheme as soon as possible”.
ASIC continued: “If you are not a member on 1 November, your authorisation will become invalid, and you will need to cease providing credit activities.”
Further, ASIC has warned that it would not be providing further relief if credit representatives fail to become members prior to 1 November.
Following ASIC’s announcement, MFAA CEO Mike Felton told The Adviser: “Had transitional relief not been provided, brokers who are CIO members and who had not registered with AFCA or received confirmation of their membership would have, as of close of business [on Friday, 21 September], been non-compliant (in breach of ASIC licensing obligations), effectively preventing them from being able to provide further credit assistance until resolved.
“This would have been both highly disruptive and costly to the mortgage broking industry and the customers we serve.
"Fortunately, following discussions with ASIC, transitional relief was provided to better facilitate an orderly transition.”
Mr Felton continued: “Obviously, if there are any brokers who have not already applied to AFCA, they should do so immediately.”
The corporate regulator also noted that separate relief has been given to licensees and “persons who authorise credit representatives” in relation to their obligation to notify ASIC of details of their AFCA membership.
“Under this relief, affected persons need not notify ASIC of these details until 1 November 2018, and will have until 30 November 2018 to provide this notification,” ASIC stated.
Moreover, director of QED Risk Services Greg Ashe told The Adviser that while he’s pleased that ASIC “stepped up to the plate” and provided relief, he is concerned about other issues involving the AFCA transition, including that the law currently requires brokers to notify ASIC of a change in EDR scheme, despite the form not including AFCA as an option.
“I get the feeling that the AFCA transition is actually going to make the problem worse than it already is. It was bad enough to begin with, but I think this is going to make it even worse. There is a lot of negative feelings and calls for better consultation and a moratorium on ASIC’s behalf, really,” Mr Ashe said.
“We need someone to take responsibility. No one is prepared to take responsibility for what is falling out of their mouths.
“I would love to see ASIC see that this is an issue, and then we all work together to educate everyone and we get everyone properly set up the way it was supposed to be set up and then we can go back to running our businesses,” he said.
ASIC recently issued a reminder to all financial services and credit licensees, including mortgage brokers, to join the new external dispute resolution (EDR) body, which combines the Financial Ombudsman Service, the Superannuation Complaints Tribunal, and the Credit and Investments Ombudsman.
The initial deadline for credit representatives to register with AFCA was Friday, 21 September 2018, with the corporate regulator warning that firms that do not apply for membership could lose authorisation to act as financial services and credit representatives by breaching provisions under the National Credit Act.
Equipment finance lender Axsesstoday, which had been placed into ...
Head of Choice Aggregation Stephen Moore has encouraged brokers t...
Several leading brokers have suggested that APRA’s recent chang...