New sections 53A and 53B of the National Credit Act (inserted by the ASIC Credit (Flexible Credit Cost Arrangements) Instrument 2017/780), impose a prohibition on payment of benefits to intermediaries (generally car dealers) under flex commission arrangements (where the higher the cost of credit the greater the commissions earnt) from 1 November 2018. Background.
In ASIC Credit (Amendment) Instrument 2018/706 ASIC has made 3 changes to facilitate the transition and avoid inconsistencies in application:
- the prohibition does not apply in relation to a credit contract or consumer lease that was entered into before 1 February 2019 as a result of either an offer that was made by the credit provider or lessor before the instrument commences, or an acceptance before 1 February 2019 by the credit provider or lessor of an offer made by the consumer before the instrument commences. Given the different offer and acceptance models that may be used for entering credit contracts and consumer leases, the additional transition provision minimises disruption to stakeholders;
- The instrument amends the notional definition of “home loans” which are excluded from the prohibition to be consistent with the broader range of purposes relating to residential property that result in a contract being regulated by the National Credit Act;
- excludes from the prohibition benefits that are paid to a person acting in the capacity of a mortgage manager as defined in regulation 26.