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By Su-King Hii Regulations (National Consumer Credit Protection Legislation Amendment Regulations 2010 (no.2)) exempting referral activities by professionals such as financial planners and accountants for their clients in relation to consumer credit, commenced on 21 July 2010. This is an important exemption as many planners find themselves in a position to provide incidental advice on credit matters such as debt consolidation, home loans and consumer leases. The effect of this exemption is that a financial planner can freely refer their clients to a mortgage broker or a bank for their clients’ credit needs without the need to obtain an Australian Credit Licence or become a credit representative of another licensee. For the exemption to apply, the referral activity must comply with the following: (a) The adviser informing the client that a licensee or its representative is able to provide a particular credit activity or a class of credit activities;

–– The referrer exemption is a very useful tool for advisers who wish to provide incidental services in respect of credit products, but they must be mindful of the stringent conditions of the exemption.

fee to any person in relation to the referral; (g) The client consents to the adviser passing on the name and contact details; and (h) The adviser engages in the activity as a matter incidental to the carrying on of a business that is not principally making contact with persons for the purpose of passing on their details to other persons. The following additional requirements must also be met:

(b) The adviser passing on the client’s name and contact details to the licensee or its representative;

• The referral activities must be the subject of an agreement between the adviser and the licensee or its representative;

(c) The adviser providing a short description of the purpose for which the consumer credit is sought (if known);

• The agreement must be in writing, and it must specify the conduct in which the adviser can engage (that is, the adviser acknowledges and agrees to the limitations on the information they can provide to a client, the need to obtain their consent to having their details passed on and disclosing the benefits to them);

(d) The adviser is not banned from engaging in credit activities under a law of a State or Territory or under the NCCP Act; (e) At the time of referral, the adviser discloses to the client any commissions or benefits that the adviser, or its associate, may receive in respect of that referral; (f) The adviser has not required the payment of a 44 | financial

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• The adviser must pass on the client’s details within five business days; • The adviser must not conduct a business as part of which the adviser contacts persons face-to-face from non-standard business premises (such as a

After receiving the referral from the adviser, the credit licensee or its representative (such as a mortgage broker or bank) must contact the client within 10 business days. When contacting the client as a result of the referral, certain information must be disclosed, such as confirmation that the contact has been initiated as a result of the referral by the adviser, benefits payable to the adviser, and whether the client is happy to continue with the discussion. Financial planners and other professionals must be fully aware of the conditions that must be met in order to claim the benefit of the exemption. An obvious way to ensure compliance is to have the client sign an acknowledgement and consent form before the referral is made. Despite this, it is still critically important for advisers to carefully examine the parameters of their advice and services to clients. If the financial planner needs to advise the client on a particular consumer credit product, or provide other forms of credit assistance, then they still need to be licensed or authorised. Heavy penalties will apply for non-compliance. If the adviser is not licensed or covered by a principal’s credit licence, it is important that the adviser makes it clear when discussing different types of credit products, such as loans or credit cards, that the adviser is not recommending a particular loan or credit card, and that the adviser is not licensed to advise on particular credit products. The referrer exemption is a very useful tool for advisers who wish to provide incidental services in respect of credit products, but they must be mindful of the stringent conditions of the exemption. Su-King Hii is Principal at Innoinvest Consulting.

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