A recent ASIC ban of an ACL holder serves as a warning to both brokers and lenders to be careful when accepting referrals.

This month ASIC banned a Sydney broker from engaging in credit activities for three years and cancelled her Australian Credit Licence (ACL).

Although she was an ACL holder, broker Siv Lim was also acting as a referrer for Betar Prestige Cars Pty Ltd (Betar) who referred loans to Volkswagon Financial Services.

In order to make its referrals Betar was relying on the point of sale exemption found in National Consumer Credit Protection Regulation 23.  This exemption states that suppliers of goods and services are exempt from licensing where the referral is made by the supplier themselves to finance a customer’s purchase of their goods or services, or made by a referrer from the premises of the supplier (as in the case of Ms Lim) to finance the suppliers goods or services.

They key to remember is that the goods or services being financed must be supplied by the supplier and not a third party.  The activities that resulted in Ms Lim’s ban included making referrals to finance vehicles not sold by Betar or making referrals to refinance vehicles previously purchased from Betar. 

The lesson for lenders an brokers accepting referrals is to check the exemption under which the referrer is operating and have measures in place to ensure that the rules relating to the circumstances under which such referrals can be made are being followed.

In particular, it is important to remember that accepting a referral from an unlicensed entity that has not been made in accordance with the law can result in the entity accepting that referral being found guilty of dealing with an entity who wasn’t licensed but should have been.