New credit licensing exemptions for referrers and temporary employees

The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP has announced proposed amendments to the National Consumer Credit Protection Regulations 2010 and the National Consumer Credit Protection (Transitional and Consequential Provisions) Regulations 2010 in July 2010 with respect to the exemption of the referral of customers to lenders and brokers from the requirement to hold an Australian credit licence (ACL) and for contractors or employment agencies providing temporary credit services staff to be licensed.

ASIC has agreed not to take action against people and entities covered by the policy changes announced by the Minister, for failure to be registered in the short period up until the changes are implemented by Regulation.

Referral arrangements

To be eligible for the proposed referrer exemption, businesses who pass on consumers’ details (referrers) to licensees [or their credit representatives] will need to:

•from 1 July 2010:

  • only engage in credit activities as a referrer incidentally to another business they are carrying on;
  • only engage in credit activities as a representative of the licensee or registered person they are referring the customer to;
  • not have been banned from engaging in credit activities under State, Territory or Commonwealth law;
  • not charge a fee to the consumer for the referral;
  • only inform the consumer that the licensee or registered person is able to provide a particular credit activity or class of credit activities, not any particular product;
  • inform the consumer of commissions or other benefits they receive; and
  • obtain the consent of the consumer to pass their name, contact details and the purpose for which the credit is sought to the licensee or registered person.

The following additional requirements need to be in place by the end of the 3 month transitional period so that businesses using the proposed upstream referrer exemption will need to:

•from 1 October 2010:

  • pass on a consumer’s contact details within 5 business days; and
  • not conduct their business from temporary or non-standard business premises (such as a stall in a shopping centre); and
  • have in place an agreement with the licensee or registered person (in which the referrer acknowledges and agrees to the limitations on the information they can provide to a consumer and the need to obtain their consent to having their details passed on).

In addition, a licensee or registered person who makes contact with a consumer as a result of a referral must,

•from 1 October 2010:

  • do so within 10 business days;
  • inform the consumer that they have obtained the consumer’s contact details from the referrer;
  • explain the financial benefits, if any, the referrer may receive for the referral; and
  • specifically ask the consumer whether they are happy to continue with the conversation.

Temporary employees

Temporary employees engaged by ACL holders or their credit representatives will be allowed to be treated as employees of the ACL holder. This will ensure that contractors or employment agencies will not need to be licensed if their employees engage in credit activities, provided that these persons are largely supervised and managed in the same way as the employees of the licensee.

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