ASIC regulation of credit advisers is a certainty; the degree to which credit advisers will be bound by the complexities of AFSL regulation is yet to be seen. It seems a lighter weight approach is being used that will be staged over 2 years. Some key features of the new regime include:

• Extending the powers of ASIC to be the national regulator of the new credit framework with enhanced enforcement powers.

• Requiring licensees to observe a number of general conduct requirements including responsible lending practices.

• Requiring mandatory membership of an external dispute resolution (EDR) body by all providers of consumer credit and credit-related brokering services and advice.

• Extending the scope of credit products covered by the UCCC to regulate the provision of consumer mortgages over residential investment properties.

CP113 covers the new credit adviser competencies:

Certain people within a credit licensee's or licence applicant's business (i.e. the credit licensee's or licence applicant's ‘key people') are subject to a ‘fit and proper' test. We (ASIC) propose to look to these key people when assessing the credit licensee's or licence applicant's organisational competence. Generally, we propose that these people have either:

a) Credit industry qualifications to at least the Certificate IV level; or

b) another relevant higher level qualification, and

c) at least 2 years relevant problem-free experience.

d) In the case of a key person involved in a mortgage broking business, we propose to generally expect them to have completed at least a Certificate IV in Financial Services (Finance/Mortgage Broking).

e) We propose that a credit licensee's key people should undertake 20 hours of continuing education per year.

We (ASIC) expect financial planners and financial advisers who advise on mortgages in a substantive way as part of their business to have sufficient training in the credit products they are advising on. If they provide services akin to a mortgage broker (e.g. they suggest a credit provider and mortgage product to a consumer and get paid a commission from the credit provider), we would expect them to have at least a Certificate IV in Financial Services (Finance / Mortgage Broking). We recognise, however, that some financial planners and financial advisers may only engage in credit activity in a very limited way, and in these circumstances the mortgage broking qualification may not be justified.

We recognise that financial planners and financial advisers often provide advice about their client's home loan in the context of broader financial advice and that they will usually have financial services Tier 1 qualifications in accordance with RG 146. Where a financial planner or financial adviser suggests a consumer obtain a new loan (or switch loans), or helps them to do so, we think the financial planner or financial adviser should hold a Certificate IV in Financial Services (Finance / Mortgage Broking) in addition to their other financial services qualifications and also meet the 20 hours ongoing training requirement. But where the financial planner or financial adviser simply refers to a consumer's current lending arrangements as part of an overall financial plan, we think that it may be appropriate for the financial planner or financial adviser to be exempt from the specific mortgage broking training requirements in Proposals C2-C3.

We propose to give all mortgage broker representatives until 31 December 2013 to obtain the Certificate IV in Financial Services (Finance / Mortgage Broking).

Is this an appropriate timeframe for mortgage brokers to gain this qualification?

Rationale

For representatives who are mortgage brokers, we propose to allow until the end of 2013 to meet the requirements. The proposed transition period gives mortgage broker representatives a lengthy period of time in which to choose a course provider, enrol, and complete the study and assessment for the Certificate IV in Financial Services (Finance / Mortgage Broking).

While our prerequisite requirements will be an adjustment for some mortgage broker representatives currently in the industry, we believe that the Certificate IV qualification will promote professionalism in the mortgage broking sector of the credit industry and ultimately will increase consumer confidence in that sector to the benefit of all participants.

An increase on client focus, in credit related advice and the need to understand the context of the client when providing credit related services, will be features of the new regime.

The key dates are:

Under the National Consumer Credit Protection Bill:

• Anyone who engages in certain credit activities will need to register with ASIC between 1 November and 31 December 2009 (inclusive).

• Registered credit participants will then have six months to apply for an Australian Credit Licence (ACL), between 1 January 2010 and 30 June 2010.

• New entrants to the credit market will have to apply for an ACL from 1 January 2010.

• Responsible lending obligations will commence on 1 January 2011.

Compiled by Michael Perkins