QLD NCCP on aggregator receiving upfront commissions

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Howdi123

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22 June 2017
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Aggregator like Aussie Home loan, had brokers working for them who had accreditation code that identifies the broker as "Aussie Home Loan". The lender use that information to pay upfront commissions to the aggregator when a loan application had settled.

My question is if the broker continue to use the same accreditation code after they left the aggregator, and the lender pay upfront commissions based on the accreditation code and the aggregator received the upfront deposit and treat it as part of the profit. Would the aggregator break any NCCP rules or ASIC?
 

Rob Legat - SBPL

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There are a wide range of potential issues here when looked at in total, which will depend on the particulars. Looking specifically at the National Consumer Credit Protection and ASIC legislation, you'd find ASIC (who regulates the NCCP) will generally look first to the NCCP and then add the ASIC Act provisions as 'addendums' - because the NCCP provisions are more particular, and the ASIC provisions are more general. It will ultimately, again, come down to the facts.

This may be a little long winded, but there's a point to it.

In terms of the NCCP, there are broadly two types of licensees: credit providers (lenders, lessors) and credit assistance providers (brokers). The NCCP doesn't differentiate between 'broker' or 'aggregator'. Licensees can sub-authorise parties to do some of the things the licensee can do - if they are not an employee or director of the licensee, they must be registered with ASIC as an authorised credit representative. Any breach of the law by an authorised credit representative is considered a breach by the licensee.

It's an offence to engage in a credit activity without the appropriate credit licence, unless you're doing it as an authorised credit representative of a licensee who is authorised for the particular activity. For example, an entity with only credit provider's conditions on its credit licence cannot engage in credit assistance provision (and vice versa). You can have both.

It's also an offence to lie about the type of licence you have, or pretend you have a licence. This includes advertising.

And lastly, relevantly, a licensee cannot engage in a credit activity, or conduct any business with another entity who is engaging in a credit activity, unless that other entity holds the appropriate credit licence or is an authorised credit representative of a licensee holding a relevant licence.

What's that all mean? Well, in the limited information you've given it will largely come down to who holds the appropriate licences and who they are dealing with. Licensees have to keep a close check on their authorisations - especially since they wear liability. If we assume, and I think reasonably, that Aussie Home Loans is a licensed credit assistance provider and didn't take steps to remove the authority of the broker when they left employment, they could potentially be in a lot of trouble. By extension, the lender could as well by unknowingly engaging in business to provide a credit activity with the broker who did not hold the appropriate licence or authorisation. While it may be argued that they were innocently mistaken, there are positive obligations under the Act to ensure you know who you are dealing with - which in practice shoots that argument out of the water.
 
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Howdi123

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22 June 2017
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Thank you for the respond. I always assume it is the lender responsibility to pick up the issue. However, after reading up your comment. I am wrong.
 

Rob Legat - SBPL

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It's the licensee's responsibility. You might find that ASIC would consider both the lender and the broker to be at fault.
 
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Rob Legat - SBPL

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You might also find that Aussie has ramifications from the lender, most likely under breach of contract, for failing to revoke the individual's access to the system/notify Aussie to do so.