While many brokers may be members of the MFAA or FBAA, there are an increasing number of brokers turning to a third broker association for representation. Annie Kane finds out more about the Commercial Asset Finance Brokers Association of Australia
NEARLY A decade ago, the Victorian Australian Asset Finance Association and the Australian Equipment Finance Association (AEFA) in NSW merged to create one big association for commercial brokers; the Commercial Asset Finance Brokers Association of Australia (CAFBA).
According to David Gandolfo, president of CAFBA, the move was needed to ensure a coherent voice was being put forward to the regulators, government, and industry in terms of broking for business.
“Instead of those bodies competing with each other for members and for attention and for advocacy for their members, by having one national body that would have board members from across the states and membership in every state, we would be able to go to Canberra as one united voice of the asset finance broking industry.”
The association has now grown to a large national organisation with around 600 business-loan writing members, in addition to 190 broking firms. There are also around 50 financiers and sponsors of CAFBA who are also members.
Mr Gandolfo says that while the association doesn’t have the thousands of members like the MFAA or FBAA has, he says that’s a reflection of what it is commercial and asset finance brokers do.
“We are quite specialised. We only specialise in plant machinery, equipment and asset-based finance for commercial customers.
“We are specifically for commercial finance and the needs of a commercial finance broker are often different to a mortgage resi broker. The issues that we lobby for are particularly around NCCP (and why it is not relevant to the commercial space), and those sorts of things and our focus is different because the issues of a commercial broker are different.”
For example, CAFBA has been “fighting the creep of consumer-based lending guidelines into the SME commercial credit space”, pushing for an expansion and extension of the instant asset writeoff (which was recently given a 12-month extension in the budget) from $20,000 to $50,000, petitioning for SMEs to be able to claim 50 per cent of the cost of an asset (whether new or used) in addition to normal depreciation, and working to try and remove the assumption that tax debt makes a lender risk (as many lenders will not approve an equipment finance transaction while ATO debt exists).
But the thing that CAFBA really wants to see, is for providers of consumer finance at the point of sale (POS) to be bound by the same regulations and credit laws as brokers.
“We are absolutely vehement in our opposition to the POS exemption, which was put in place by Chris Bowen, when he was Minister for Financial Services almost seven years ago,” Mr Gandolfo says.
“It was supposed to be a 12-month exemption, a temporary exemption so that the current industry could get itself up to speed with the requirements of the consumer credit protection and Australian credit licensing requirements but they still don’t have to have those licensing requirements. One of the problems that arises out of that is that it makes the playing field very uneven in terms of what we have to do against what the car dealers have to do. And, it means that the consumer doesn’t have any protections either.”
He adds: “We find it absurd and frankly obscene that this can continue to exist six or seven years down the track… ASIC has done two reviews — one into car dealerships remuneration and flex commissions, and one into insurances and both of those things would have been resolved if the POS exemption had not been allowed to exist.”
Aside from working on regulation, the body is also working on improving the education of asset and equipment finance brokers.
David Gill, the chief executive officer of CAFBA, reveals that to join the association there is a minimum education requirement of a Cert IV in Finance and Mortgage Broking, but says that “a lot of the material of that is consumer-related and doesn’t hold a lot of product knowledge into what the brokers actually do.”
As such, CAFBA is aiming to raise the bar by developing a specific education programme for those working in commercial equipment finance.
Mr Gill explains: “We are very close to developing an education piece where the Cert IV will actually be specifi c to a commercial equipment finance and then the diploma will be specific to equipment fi nance and the advance course will emulate the American model of having a post nominal, which is a Certified Lease & Finance Professional designation.”
Mr Gill reveals that the association is currently working with the Australian Equipment Lessors Association to ‘Australianise’ it.
Similar to the equivalent of a CPA for accountants, the “very intense course” would be available to brokers and lenders and become an industry recognised course.
Mr Gill says: “There’s not enough work going on in [education for equipment finance brokers] here. There’s no definitive course and I know aggregators and some banks have their own courses but to be honest they’re not robust enough. I think they just scratch the surface.
“It’s about letting people know what equipment finance is, the things that people should know like present value concepts and discounted cash flows, the mathematics behind it — all those sorts of things need to be taught properly. So, the career path for this is the introductory course, then intermediate and ultimately, advanced, which will make someone very well qualified in commercial and equipment finance whether they are working for a broker or a bank.”
The end game, Mr Gill says, is to professionalise the sector and make equipment finance something with a clear career path. “Research has shown us that new people entering the industry, particularly Generation Y, they want a career path and they want to be able to see where that career path and the study will take them.
“So, we want a commercial equipment finance broker to be a profession… something that people who have a business studies degree, for example, will consider doing as a career.”
Mr Gandolfo adds: “This is all what CAFBA’s role is, to educate the market that it serves and to maintain a minimum standard, and education is an incredibly important part of raising that minimum standard.”
As well as raising the bar for education, CAFBA is soon to make a slight tweak to its name to reflect the changing nature of its members, to become the Commercial & Asset Brokers Finance Association of Australia.
He explained: “We were being approached by a lot of commercial brokers who were saying that the sorts of things that we were advocating for in the commercial space were applicable to them and asking if they could join our body.
“So, we will represent the interests of commercial brokers who were doing commercial banking and property as well as asset finance brokers. We aim to cover the whole of commercial loan writing, not just commercial asset finance.”