The Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers) (Mortgage Brokers) Regulations 2020 have been registered.

These regulations clarify the conflicted remuneration restrictions for mortgage brokers in the new Part 3-5A of the National Consumer Credit Protection Act 2009 which was inserted by the Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures) Act 2020. The changes will commence on 1 January 2021.

Background.

The Regulations prescribe the circumstances under which a benefit is and is not conflicted remuneration. They also prescribe circumstances under which conflicted remuneration must not be accepted and circumstances in which conflicted remuneration must not be given for the purposes of proposed paragraph 158NA(b) of the Credit Act.

The Regulations amend the Credit Regulations to prescribe five different kinds of benefits that are not conflicted remuneration.

These are:

• certain monetary and non-monetary benefits given by the consumer;
• monetary benefits that meet a number of specific requirements directed at ensuring the benefits are transparent and do not negatively impact consumers;
• infrequent, low-value non-monetary benefits;
• non-monetary benefits related to education and training; and
• non-monetary benefits related to IT support.

In relation to monetary benefits, the requirements include that the benefits are not volume-based benefits or campaign-based benefits.

In relation to certain residential property loans, if a benefit is linked to the amount borrowed, the value of any commissions paid within the first year of the loan must be linked to the amount drawn down by the borrower, calculated in accordance with the Regulations.

Clawback arrangements in relation to monetary benefits must also meet certain requirements.

The Regulations exclude line of credit facilities, reverse mortgages and credit facilities which are predominantly for construction or renovation purposes from the commission calculation.

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