Many brokers will be familiar with credit repair agencies, the companies that step in to help difficult borrowers improve their credit score and get the loan they need.
But for many years, the credit repair industry was something of a Wild West, with no oversight by regulators and no process in place to deal with unethical actors.
In light of a new ASIC regulatory process that kicked in as of last month, Australian Broker spoke to a legal expert in the field, Joseph Trimarchi, to go through the weeds on the new rules, and explain just how mortgage brokers will now benefit from them.
“Credit repair isn’t that new: it came about 8 or 9 years ago,” explained Trimarchi, who is a specialist solicitor in credit repair. “The industry back then was effectively unregulated, and until recently, remained so, until ASIC came in. They saw that there were quite a few operators out there and needed to re-evaluate the industry.”
“The cause for regulation, I think, is valid, in that a lot of the operators out there were operating with little to no ethics. In doing so, they were compromising the consumers who used the services.”
“ASIC came along and said that each operator in the credit repair arena needed to now be regulated. The licencing process, which is a credit licence that has to be obtained from ASIC, commenced in July this year, so it’s relatively new.”
“There was a lot of documentation that had to be lodged with ASIC to verify experience, status, professional abilities and things like that. The parties that lodged that by July have been granted a transitional licence, pending a full licence being issued.”
“That’s where we are now: ASIC is in the process and determining these licences, satisfying themselves regarding the credentials and the ability of the operators to be deemed fit and proper persons.”
“At some point in the future, I assume, they will offer full licences for people to operate in this field, which will hopefully allow ASIC the ability to place embargoes and penalties on those who are not acting in the interests of the consumer and outside the scope of that licence.
“Mortgage brokers use the service of credit repair agencies all the time. Because of the licencing, they can now refer their clients with a higher level of confidence, knowing that the operators out there are licenced as a opposed to unlicenced. So the standard of operator has gone up a notch.”
“That should give brokers a lot more confidence in understanding that their clients are going to be dealt with in a professional and ethical manner.”
“In the credit repair field, I’m one of the few people that is a practicing lawyer. Part of my practice operates in the credit repair field, so as a practising solicitor, I have a double whammy compared to credit repair companies.”
“Along with the credit repair requirements under ASIC, I also have the Law Society of New South Wales to compel me to act in a proper fashion with all consumers. In other words, I’m an advocate for licencing because it brings all the previously unregulated credit repair companies into line.”
“That’s a bonus for consumers, who use credit repair companies, and also for brokers, who can now refer with a level of confidence, know that the companies that they refer to have to be licenced.”
