The point of sale (POS) exemption for vendor introducers enhances the likelihood of risky commercial finance and, as a policy, should be reconsidered.
This is the view of the Commercial Asset Finance Brokers Association of Australia (CAFBA) who has called upon the Productivity Commission to examine this “broken policy” and the risks it entails.
In a submission on the commission’s inquiry into competition in the Australian financial sector, CAFBA said that exemptions exclude POS vendor introducers from both the credit licencing regime and responsible lending obligations.
“The outcome is brokers of business finance fall into two broad classes; those who are required to be licensed and those who are not, simply because they are vendor introducers.”
This policy – originally introduced as an interim exemption of 12 months – had now been in place for seven years, offering “deep distinct business and competitive disadvantages,” the association said.
“The negative consequences of this policy are that the exemption provides an opportunity for high-risk commercial finance to be provided to consumers. It opens a window of opportunity for inexperienced individuals with limited training to provide low-quality services to businesses.”
CAFBA also brought up a number of further concerns around POS exempt introducers in that:
- They are not required to meet any entry standards
- ASIC cannot exclude them from the market
- They can recommend credit products without conducting a customer assessment
- There are limited options for consumers dealing with vendor misbehaviour
“These characteristics are at odds with the requirements of finance brokers, such as many CAFBA members who are licensed to arrange consumer finance, complying with the [NCCP] Act and applying responsible lending practices.”
“The exemption, therefore, does not provide any means of adequately regulating or controlling the activities of POS vendor introducers who may cause loss or damage to consumers, despite their linked credit providers/lessors being responsible for their conduct.”
Risks are compounded, CAFBA warned, when the POS vendor introducer chooses a financier on the basis of commissions received, especially where these commissions increase the cost for the consumer.
“The exemption also means that there is a lack of competitive neutrality between POS vendor introducers and other businesses, like licensed CAFBA members, which are performing similar functions.”
With these anti-competitive consequences in play, the POS vendor introducer exemption is “bad public and competition policy,” CAFBA said.
“CAFBA does not see competition law public benefit in keeping the current POS vendor introducer exemption.”
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