Incoming regulations from the Australian Securities & Investments Commission (ASIC) may mean credit representatives are slugged with additional costs as large brokerages and aggregators deal with extra fees.
The ASIC Supervisory Cost Recovery Regulations will commence in the second half of the year with the regulator attempting to recover costs of operations from firms and individuals within the credit industry and other sectors under its jurisdiction.
ASIC will levy sub-sectors at a flat rate where costs remain stable while introducing fluid levies in other sectors where regulatory costs vary significantly, said Elise Ivory, partner in the banking and finance group at Dentons at the firm’s Credit Law Training event in Sydney yesterday (31 May).
The new regulations potentially involve “very large sums of money being paid by every single person in the industry when they didn’t previously have to make those payments,” she said.
In an extreme case scenario, a mainstream lender with credit representatives which also offers small amount credit contracts will be hit with three levies for each of these fields.
Larger players such as aggregators would have to determine how they will deal with these additional costs, Ivory said.
“Will [they] therefore start charging credit reps?” she asked. “[They] already do, but will [they] add extra to it? There still needs to be something where the credit rep gets value for being a credit rep as opposed to holding their own licence. Industry will have to work out how they will deal with that fee once it’s imposed.”
There are also a number of questions around how these new regulations will apply. For instance, large brokerages with employees and no credit representatives would not have to pay a levy, she noted. On the other hand, business models entirely using credit reps who want to be independent contractors will be hit with added fees.
“The problem here is possibly that there’s no completely fair way to do it and they’ve come up with the best they can.”
Larger players can also be hit with a corporation fee, meaning that these costs will add up once these regulations come into play, Ivory said.
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