Introduction
The D Day for the finance industry to comply with ASIC’s guidance in RG206 regarding qualifications and ongoing training is rapidly approaching – 30 June 2014. Is your business ready?
Background
The obligation for representatives to meet education and training standards derives from section 47(1)(f) of the NCCP Act which provides that ‘The licensee must maintain the competence to engage in the credit activities authorised by the licence’ and section 47(1)(g) which provides that ‘A licensee must ensure that its representatives are adequately trained, and are competent, to engage in the credit activities authorised by the licence’.
RG206 states ‘What you need to do to comply will depend on the nature, scale and complexity of your business. However this guide sets out our minimum expectations for demonstrating organisational competence’.
ASIC gave industry until 30 June 2014 to comply. ASIC’s regulatory guides do not have the force of law but are strongly persuasive – especially when ASIC is the licensing body. The requirements will apply to responsible managers and ‘representatives’ – and there is no grandfathering – ie existing managers and representatives will be required to comply from 30 June 2014.
What are the requirements?
The requirements are set out at the end of this article.
Requirements for ‘representatives’
There are some particular issues regarding the requirements for ‘representatives’. ‘Representatives’ include both employees of licensees and externally appointed credit representatives.
RG206.20 provides that ‘Generally, we have not set specific training requirements that we think representatives should meet. We think that as a credit licensee, you should:
- determine for yourself what is appropriate initial and ongoing training to ensure your compliance with the representative training obligations; and
- embed this in your recruitment and training systems.’
In RG206.21, ASIC says that despite RG206.20, they have set specific requirements for representatives who provide home loan credit assistance. RG206 sets different education and training requirements for:
- representatives who provide ‘third party home loan’ credit assistance; and
- representatives who provide credit assistance in relation to credit products ‘offered by their own credit licensee’
So, it is important to understand what RG206 means by ‘credit products offered by their own credit licensee’.
What does ‘own credit products’ mean?
On one view a representative should fall within (b) above even if the representative’s licensee is not the credit provider (lender of record), so long as the representative is not acting as finance broker in relation to a number of products from different sources.
These representatives could be representatives of:
- a mortgage manager;
- a servicer of a securitisation program;
- a distributor of a single lender’s product.
Example: A Limited is the manager of a securitised mortgage program. The lender of record is a trustee. Accordingly, A Limited is not the credit provider of the loan, but its representatives are dealing with the licensee’s own product.
In response to an enquiry by Gadens, ASIC has recently stated that representatives providing home loan credit assistance on behalf of a licensee that is party to a servicing agreement with a special purpose funding entity (generally trustees of securitisation trusts and bare trusts) are equivalent to representatives providing credit assistance in relation to credit products provided by their own licensee.
However, more generally, ASIC considered that the term 'third party home loan credit assistance' covers a broader range of circumstances than just finance broking, and sothe lower education standard will not apply simply because the representative, and their licensee, only offer one source of finance. Accordingly, representatives of a licensee who distributes a single product may be providing 'third party home loan credit assistance'.
What are education and training standards?
The following table is taken from RG206.
Table 1: Training expectations
Click here to view table.
Table 2: Training outcomes for representatives providing home loan credit assistance in relation to their licensee’s own loans (ie not brokers)
Click here to view table.
